Tesco, Hudl and multichannel marketing

Now that Tesco is out of its disastrous Fresh & Easy US convenience store chain, the UK retail giant is (like every smart retailer) focusing on multichannel marketing strategy. It's also thinking global and looking beyond retailing to enhance relationships with consumers.

• Tesco has been introducing drive-through grocery pickup at select locations. Shoppers log onto the Tesco website to buy, indicate a two-hour window for pickup and then collect their groceries from the store or pickup location of their choice.
• Supporting its online grocery sales, Tesco has opened its sixth warehouse for picking and packing customer orders.
• Tesco is getting good reviews for its Hudl budget-priced tablet computer (right), and plans a new model this year. Putting the spotlight on tech updates the retailer's image and reinforces its commitment to multichannel marketing. It also helps Tesco compete against Asda, which has its own Lifetab tablet.
• Tesco is moving ahead in India, a continuation of its partnership with Tata that began in 2008, to build sales and gain experience in this unusual retail environment.
• Years after launching Tesco Bank, the company has begun offering a current account, which in combination with its mortgage offerings will raise the firm's profile and attract new interest. Especially with the "easy switch" banking rules now in effect, Tesco Bank sees new opportunity to deepen its relationships with consumers who shop in its stores.

Tesco's troubles with Fresh & Easy

In 2006, Tesco announced it would enter the US market with a new chain of fresh-food stores, Fresh & Easy, to open in 2007. Tesco's strategy experts had noticed a gap in the retail market between small convenience stores and large supermarket outlets. Fresh & Easy was designed to fill the need for an easy-to-navigate store with a wider variety of farm-fresh fruits, vegetables and freshly prepared foods for shopping convenience.

Unfortunately, the US venture has caused Tesco endless headaches. Fresh & Easy has struggled to attract and retain loyal customers, to position itself in a way that's meaningful to customers and to build a well-differentiated brand. Early on, it established an expandable logistical operation to serve hundreds of stores, only to discover that the model needed to be adjusted to the retail reality of the market.

Year after year, the losses mounted. At the start of 2012, Fresh & Easy was 'temporarily' closing some underperforming stores. Its parent then postponed the projected break-even date to 2013 . . . and later postponed the projected break-even into 2014.

Now, at the end of 2012, Tesco has announced it will give Fresh & Easy and its 199 remaining stores a strategic review. In other words, Fresh & Easy will probably be sold or closed. 'It's likely, but not certain, that our presence in America will come to an end', the CEO told reporters.

What happened? Well, the global financial crisis, for one thing. When Tesco opened Fresh & Easy, 'not even the brightest economists in the world could foresee the unprecedented crisis in the markets about to engulf the world', writes Tesco's CEO, Philip Clarke, in a blog post today. And it's true that the states where Fresh & Easy had stores were hard-hit by economic woes.

Yet the economy is only one factor in the challenge that has cost Tesco dearly. Early on, retail experts warned that Fresh & Easy would have difficulty capturing sales and profits from very well-known competitors like Trader Joe's, Costco, Walmart and Whole Foods Markets. A major Tesco investor stated publicly that he doubted Tesco would be able to reach its financial goals for Fresh & Easy. Tesco initially budgeted very little for advertising that would build brand recognition, another decision it later reversed in an attempt to build its name and build a following.

What's next for Fresh & Easy?

Fresh & Easy closes more stores to lower losses

Tesco continues to struggle with its money-losing U.S. stores under the Fresh & Easy brand. The company is 'temporarily' closing another dozen stores, even as it opens additional outlets in more upmarket areas.

A Tesco spokesperson told The Guardian:

'At this time, there is simply not enough growth in sales and customers at these stores to keep them open.

'We will close these stores over the coming weeks and we will reopen them when economic and business conditions warrant...For every store we're closing temporarily, we are opening two'.


To move from losses to profits, the Fresh & Easy chain needs an estimated 300 U.S. stores. It is currently opening smaller shops. Tesco has said it wants this chain to achieve profitability during 2013. What's next for Fresh & Easy?

Fresh and not so easy: Tesco in the US

In 2007, after years of study, Tesco crossed the pond to open its first Fresh & Easy neighborhood grocery store in California. The UK-based supermarket powerhouse has since opened more than 150 stores in California, Nevada and Arizona, sunbelt states that were growing rapidly and had strong economies--until the recent recession.

Tesco's plan to offer fresh produce at low prices seemed the perfect combination for the US market. However, Fresh & Easy ran into fierce competition from long-established supermarkets and from discounters-with-attitude (such as Trader Joe's). The recession didn't help, either.

Having lost millions of pounds on Fresh & Easy, Tesco made some changes to gain sales momentum. For example, the chain originally planned no advertising--it prefers to communicate directly with customers via Twitter, blogging, YouTube, Flickr and the Web. Instead, it reportedly has begun an advertising campaign to increase brand awareness and preference.

Tesco's chief executive now expects Fresh & Easy to turn a profit by the end of 2013. On the other hand, management of the US conglomerate Berkshire Hathaway, which owns 3% of Tesco, thinks that Fresh & Easy has more work to do if the chain is to succeed in the intensely competitive US market. It must increase revenue, attract more customers and reinforce loyalty. What does the future hold for Fresh & Easy?

Recession Testing Tesco

Tesco, feeling the effects of recession, is growing more slowly than anticipated. One reason is competition. Many UK bargain hunters are filling their trolleys at Asda and other deep-discount stores, while US bargain hunters who might have shopped at Tesco's Fresh & Easy local food marts are buying foods from Wal-Mart (updating Tesco case in Chapter 1 of my book). In response, Fresh & Easy's 120 stores are sharpening their focus on "value" (meaning carefully-selected items with especially attractive prices).

Now Tesco is giving London shoppers a green reason to go to its stores, by planning an electric car recharging station. Shoppers can plug in a car before they start to shop and then drive away two hours later with a fully-charged battery and, Tesco hopes, a car full of groceries. Going green is a long-term strategy for Tesco, not just a recession-era gimmick. CEO Sir Terry Leahy is fully committed to eco-friendly operations and to educating shoppers about doing their part. He tells the Times: "Businesses have to show how the consumer can make a difference."