In early 2006, Tesco plc decided to enter the US market with convenience stores (Fresh & Easy Neighborhood Markets) to be launched by 2007. Tesco had been studying the American market for two decades and its entry was long time coming. Though the company is not faring that well (currently loss making and is not predicted to break even until the financial year 2012), it hopes to turnaround sooner than later.
The following are some of Tesco’s mistakes in the US market:
The American way of shopping – Car culture and weekly shopping expeditions
Tesco opened stores in California, Nevada and Arizona offering about 4000 fresh products. But US customers do not shop daily, particularly in California where families shopped weekly in cars. Tesco on the other hand wants to cater to shoppers who have less time and want fresh and healthy food.
Competition not only from US super chains
Tesco was also facing tough competition from Japanese owned supermarket chain FamilyMart which had started two premium convenience stores under the banner Famima in California and had big expansion plans. The Japanese store offered a new community lifestyle experience along with services like banking, stationary department and also Japanese delicacies like sushi, noodles etc. Its imported groceries also cost less than Tesco.
No Discount Coupons
The American customer wants to try something before making a final decision on buying. Even discounts or taste samples help in finalizing a deal. But Tesco removed discount coupons.
No Promotional Fliers
There is less loyalty in the US market with the American consumer shifting loyalties based on weekly/daily special promotional offers. Tesco assumed that like British consumers who would not switch loyalties easily, the Americans would follow suit. A focus group found that Tesco was not sending fliers promoting the latest special offers.
Good Effort but No Learning
When Tesco entered US, it did not go unprepared into the American market. It sent around 50 to 60 British executives to live with California families to discover the products they bought and the food they ate. But with Tesco’s dropping profits it seemed they did not learn much into the American way of buying.
Tesco did not partner with a US retailer when entering the US market and also intended to use its own proprietary distribution system.