lar readers are aware, we've been reporting on, writing about, and offering analysis on the international small format food retailing revolution for the last 4-5 months.We've written about Tesco's Express stores in Europe, the retailer's new Fresh & Easy Neighborhood Market small store format in the USA, German grocer Aldi's no frills, price-impact, small format grocery markets throughout the world, and others.
Among the others include: U.S. grocer Giant Eagle's Express format stores, Whole Foods Market, Inc.'s Express prototype store soon to open in Boulder, Colorado, Wawa Grocery Markets, Trader Joe's, and Wal-Mart, which is developing two small format stores: a grocery market and a small footprint health and wellness-type store. (Check out the blog's archives for the numerous small format and related stories.)
We've termed the international proliferation of small format stores--some upscale, others no frills with price-impact positioning, and still others somewhere in the middle--no less than a revolution in food retailing.
This isn't because there haven't always been small food stores throughout the world. There has been. But rather it's because of the scale in which various retailers are developing the stores, the number of stores they are building, and the fact that those retailers getting into the small format food retailing business are among the largest chains in the world.
One of those retailers, Tesco, the third-biggest retailer in the world, is a key leader in multi-small format food retailing. It began with its Tesco Express stores in Britain, and is now locating the small format Express stores throughout Europe, and is planning to enter Russia with the convenience-style grocery markets soon.
Tesco also has opened about 30 of its Fresh & Easy Neighborhood Market small format grocery markets in the U.S. thus far--in just a two month period of time. The retailer plans to have as many as 200 of the combination basic grocery markets, fresh, prepared and specialty foods stores opened by the end of this year.
Now, Tesco is at it again: The retailer is developing a new, no frills, price-impact, small format food store for the United Kingdom (UK). The reason the retailer is developing the new format is to counter a growing threat in its home market from German grocers Aldi and Lidl, which operate price-impact, no frills, small format grocery stores throughout the UK.
The Aldi and Lild stores are becoming increasingly popular with UK shoppers, who like their limited assortments, low prices and convenience. Tesco sees these stores as a major threat to its market share in the UK, and has decided to fight back.
According to a story in today's London Telegraph.co.uk, Tesco has been hard at work on a top secret project in an old warehouse owned by its founder Jack Farmer, designing the new format. The retailer has created a mock German small format discount store (read Aldi and Lidl) in the warehouse and is using it as a model for their own future no frills, small format discount stores.
Tesco used this same strategy and model in developing its Fresh & Easy convenience-oriented grocery markets in the U.S. For about two years the retailer worked on the design of what today is a Fresh & Easy Neighborhood Market in an old warehouse in the states. And just like the current project in Britain, Tesco was able to keep its Fresh & Easy project quiet for some time before the press got wind of it.
But the new discount grocery format project is out of the grocery bag now, so to speak. And, once again, we see the small format revolution marching even further on.
Based on the information we have from various sources--in addition to what was reported in the Telegraph.co.uk story--the new Tesco price-impact, small format market looks like it might be similar to its Fresh & Easy stores in the U.S.--a hybrid discount grocery store, combined with low-priced, upscale specialty groceries and prepared foods offerings.
This is largely do to the fact that Aldi, and to a lessor degree Lidl, have been doing extremely well in the UK offering specialty, gourmet and natural foods items at discount prices along with private label (and some national brand) basic groceries.
Aldi has especially become adept at this--no doubt in part because the German grocer has lots of experience with private label specialty items at its Trader Joe's subsidiary in the USA. Yes, it's that same Aldi. The one that operates 900 no frills grocery stores in the U.S., and upscale Trader Joe's as well. It's also the same Aldi that operates throughout the world, and is growing its small format, discount grocery business extensively worldwide.
Tesco, the UK's number one retailer, isn't about to let Aldi and Lidl take market share away from the company in the UK though, if it can help it. Therefore, it is developing its own version of these small, category-killer, discount grocery stores.
Further, Tesco isn't waiting until it has an actual store to fight back against the two German panzer divisions of grocery retailing. Beginning this week, the mega-retailer will match Aldi's and Lidl's retail prices on over 2,000 items the grocers' sell at hot, discount prices. (Aldi and Lidl sell on average about 10,000 grocery items in their small format stores respectively.)
Additionally, Tesco is launching this week a line of 300 no frills grocery products, similar to those sold in Lidl and Aldi's UK discount stores. Further, In a few months the retailer plans to rollout another 200 items in the no frills line. These items will be sold in all of Tesco's UK supermarkets. It's also expected that this will be a good test market for the items in terms of their merchandising potential in the future Tesco no frills, small format , discount food stores.
The small format food retailing revolution may not be being televised, but it's heating up throughout the world. Stay tuned.
Resources:
Read more about the Tesco's new no frills, small format, discount store plans here.
Read more about Tesco's new no frills product line here.
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