#93 Global retail: size doesn’t matter, or does it?
Yes, the British are leaving the United States – again. After a $1.6 billion investment, British supermarket giant Tesco announced that it may be selling it’s US “Fresh and Easy” chain. Clearly, corporate PR speak for “we are pulling out of the United States altogether”. What has happened to Tesco, which successfully operates more than 6,000 stores worldwide? On the surface, the promises of convenience and tasty, freshly prepared food sounded great, but what US customers experienced was less “Fresh and Easy” and more “Small and Strange”. In the eyes of American consumers, the stores had a limited product range (terrible for a country where the pet food aisles are often better stocked than entire supermarkets in Europe), a selection that was uniform irrespective of the neighborhood of the store (watercress salad in South Los Angeles…), unfamiliar British fare instead of the ubiquitous American brands (Marmite, seriously?), too much packaging (in a country where we want our sandwiches on sourdough, toasted on one side with non-fat mayonnaise and chopped tomato – not sliced – Dijon on the upper half, and Pepper Jack, not Swiss), and – worst of all – it made customers do their own check out!
So, it’s really the old story of standardization versus adaptation and finding the right balance between protecting the efficiencies of a proven business model and adapting it to the environment of the target market. Yes, there is a tremendous amount of change in the supermarket landscape in the US that invites new concepts and experimentation, but you certainly can’t just bomb drop an entirely new concept into a market that is as competitive as, for instance the Southern Californian. You need to get the word out, listen to consumers, and slowly educate them, instead of alienating. But then again, if the entire economics of a business model are built around a standardized approach, then the only choice a company has is simply not to enter a culturally distant market. Or leave, several years and $1.6 billion later. Even if you’re a huge company such as Tesco.