Wednesday, November 7, 2007

Special Report: Inside Tesco's Hemet, CA Fresh & Easy

Observation & Analysis: Tesco's First Fresh & Easy Neighborhood Market in Hemet, CA is Basic and Utilitarian, With A Touch of 'Simple Upscale'

The "Kitchen Table," a full-service food sampling station in the Hemet, California Fresh & Easy Neighborhood Market. (photo: Financial Times.)

Tesco's Fresh & Easy Neighborhood Market in the Southern California city of Hemet, which we reported last week was already open, is a rather basic and utilitarian store in terms of its design and merchandising. Here's a look inside below.
The Fresh & Easy grocery market in Hemet is located in a renovated building rather than being a new store built from the ground-up. Tesco is both renovating empty retail store buildings and constructing stores from the ground-up in California, Nevada and Arizona for its Fresh & Easy grocery markets. Most of the five stores, which start opening tomorrow (five in Southern California) and next week (five in Las Vegas, Nevada), are in renovated buildings.

The outside of the Hemet store is attractive design-wise, sporting cream-colored and green paint, and the colorful green Fresh & Easy logo. It's a basic retail box however, owing to its former use as a conventional retail store. There's ample parking out front and around the store and some decent landscaping--but nothing we would call upscale. Perhaps "simple upscale" is a good term for the store design outside and in. It's a shade more upscale than a conventional grocery store or convenience store, but nothing on the order of a Whole Foods store, or even a Trader Joe's or a Safeway Lifestyle store.

Inside, the Hemet Fresh & Easy is a combination of conventional neighborhood grocery store and Trader Joe's-like. The store's lighting however is somewhat out of the 1950's: It's old school fluorescent bar-type light fixtures with tube lights rather than the softer-type of lighting most supermarkets in the U.S. use today.

The flooring is basic and the walls are painted in cream and green colors to capture their branding message. The store's shelving is out of the "limited assortment" or warehouse grocery retailing school. Grocery products are merchandised in cut-cases on metal "warehouse style" shelves in the core of the store. No Metro Rack shelving or sleek black metal shelving for this Fresh & Easy market.
The warehouse-style shelves are similar to those Trader Joe's uses but we think Tesco might want to go with something a bit more upscale in its other stores, especially those located in higher income neighborhoods. Slightly higher-quality shelving also will allow for stocking more specialty and natural foods items, which often require single or double facings due to slightly slower movement than basic grocery items, which can warrant full cut-case treatment.

We peg the store's retail square-footage at about 10,000-13,000 square-feet. It falls right into the store size Tesco announced and all of us who have been writing about the grocer repeated. It looks like there's plenty of back-room space as well. Our take is that the store was much larger, but in its renovation process Tesco shrunk the retail square-footage so the store could fit their target size. Nothing wrong with that, merely an observation.

The Hemet Fresh & Easy does have one feature, called the Kitchen Table, which we're comfortable calling upscale. The Kitchen Table is a kiosk-type area where a store employee is available to heat up and sample prepared foods items for store shoppers. The Kitchen Table, pictured at the top of this story, is a warm and attractive area; essentially a permanent, fully-staffed in-store demo station. We like it.

One store operations feature we question is that all of the checkout stands have self-service scanners which require shoppers to scan their own items, although clerks were there helping and bagging the items for store customers. Whether each checkout stand was staffed just for the store opening we don't know. We asked two store clerks and neither one could tell us if eventually customers would be made to scan and bag their own groceries all the time.
However, one clerk did tell us the plan is to have customers scan their own groceries as a matter of policy. And down the road, rather than having a clerk at each checkout stand to help, as was the case when we were in the store, he said there would likely be two or three clerks up front to assist if needed, depending on how busy the store was.

We're betting Tesco will abandon the self-scanning checkout system--or at least make it optional. American shoppers often like the option of scanning their groceries themselves--but hate it being mandatory. It's been tried all over in the U.S. and only works at a select few deep- discount-type stores where people don't mind the self-service because they're shopping the store exclusively on price.

Fresh & Easy brand grab-and-go prepared chicken salad, and its resusable tote bag, which the grocer says it will replace for free--forever

The Hemet store's product selection is a combination of Tesco's private label grocery, perishable and prepared foods items, under the Fresh & Easy brand, and national brand grocery and other products. There was a relatively small selection of specialty, ethnic and natural foods vis-a-vis a Trader Joes, for example. Most of the fresh produce items are in small containers (like at Trader Joe's) or in plastic bags. There's also a decent selection of fresh meats.

Fresh & Easy private label prepared foods are extensive in the store. The prepared foods offerings range from basic items like grab-and-go chicken and tuna salad, to pizza and more upscale offerings, like heat-and-eat entrees and complete dinner meals. Upscale offerings include items like mixed salad greens with balsamic dressing, prepared Japanese noodles and specialty dinner entrees. These prepared foods are all made at Tesco's huge 820,000 square-foot distribution center in nearby Riverside and delivered daily to the store.

From a pricing standpoint, Tesco is clearly trying to draw primary shoppers for basics like Milk, bread, eggs and the like. Retails on these basic items are on par with supermarkets (including discounters) in the area. Many of these staples, such as sugar, butter and more, are branded under the Fresh & Easy label. The store also carries a decent selection of nation brand basic grocery items. Brands such as Tide, Skippy (peanut butter), Best Foods and numerous others share space with the Fresh & Easy branded basic grocery and perishable items.

The store was well-staffed, as one would expect since it's their first (and currently only) Fresh & Easy open. It's clear Tesco understood there's no better impression at retail than a first impression. Store operations also were going smoothly. We didn't detect any major problems or glitches while there.

Five other Fresh & Easy stores open tomorrow in Southern California. We will be interested in comparing and contrasting the design and look of those five new stores with the Hemet grocery market.

The Hemet store was rather busy during the times we were there. It has its "official" grand opening tomorrow, along with the five other Southern California stores. Shoppers we talked to were overall positive about the store, saying it's a welcome addition to the neighborhood in this desert city of about 50,000 people. It's not an underserved community in terms of retail food stores. There are numerous large supermarkets, smaller independent grocers and convenience stores in the city. It will be interesting to observe how Tesco's first Fresh & Easy grocery market does in Hemet, and if it takes market share from both supermarkets and traditional convenience stores.

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