Fresh & Easy Sets Up Shop in Food Desert
By pretty much all accounts, Fresh & Easy has not had
an easy time of it since the Tesco-owned chain opened in the U.S. But, a new
store opening may point to a market opportunity where the chain can use its
small store format to gain access to consumers without having to go head-to-head
with more formidable competition.
The company opened a store in South Los Angeles
on the corner of Central & Adams
Boulevard in a mixed-used development containing affordable housing units and
additional retail space. Fresh & Easy, according to a press release, identified
the site over two years as a location it was looking to open. It is one of
eight stores the chain opened in California and Arizona this month.
Los Angeles
City Councilwoman Jan Perry, said, "Fresh & Easy is bringing
quality fruits, vegetables, meat, and wholesome foods to an area in great need
of grocery outlets and food options. I am excited to see this new urban model
here in South Los Angeles. I am proud that we can count them as a new investor
in our neighborhood."
Mary Kasper, vice president & general counsel,
Fresh & Easy, said,
"We fundamentally believe everyone – regardless of where they live – deserves
access to quality, fresh food at affordable prices. We’re also proud to bring
more quality jobs to the neighborhood, particularly in this economy. We had
hundreds of applicants attend our job fair at the local YMCA last month and
we have worked hard to hire right from the neighborhood."
Discussion Questions: Do food deserts offer Fresh & Easy
an easier path to success in the U.S.? What changes, if any, will the chain
have to make to its way of doing business to succeed in areas such as South
Los Angeles?
Fresh & Easy needs to do a better job aligning against the customers’ needs and not the demand of their own supply chain. Until they do that, they are going to continue to struggle.
If good retailers cannot succeed in a “food desert,” weaker, lower sales-per-square-foot retailers like Fresh & Easy will have an even more difficult time. Fresh & Easy has a reputation for taking lower grade real estate locations and they are still a long way from showing any kind of success.
With that in mind, we are seeing some strong same-store sales increases, however, their sales base is extremely low.
While it is well meaning to bring healthier foods to these areas, the demand for healthy food just isn’t there. For Fresh & Easy to be successful they will need to provide the area with the foods the consumer desires, not what some councilperson thinks they should have. As grocers, we are not in the business of being the food police but we are in the business of separating as much cash as possible from consumer’s pockets while at the same time making the consumer think it’s their idea.
The grocery issue in Downtown Los Angeles has bee a problem even way back when I was living in San Diego in the ’90s. The push to the outer realms of the Greater LA area forced retailers to pack up and move to power centers and suburban tracks to follow the customer.
Is Downtown LA not viable for grocers? Income and crime come into play but you can’t reverse the process without someone taking the first step. The smaller Fresh & Easy format may be easier to manage in more complicated areas like the downtown core and outlining areas. I wonder how the independent retailers feel about major brands re-invading their turf?
Breaking through in inner city areas offers significant upside opportunity. Consumers want, and as Fresh & Easy states, deserves QUALITY items at a fair and reasonable price point. If those consumers receive it–in grocery, clothing, automotive parts, etc.–they will patronize those retailers.
Fresh & Easy’s challenge, like other large retailers, is less likely to be with the consumers, and more likely to be in dealing with local government bureaucracy when they need help with distribution issues, access, making certain that they are not blocked by union organizing, security issues, etc.
Fresh & Easy has chosen the strategy of inner city. They’ll have to make certain that they are executing on merchandising, personnel, store operations for certain. But they will also have to deal with the cumbersome side of addressing local government — this is ongoing, and needs to have a strong focus.
Kudos to them for bringing quality to the local markets for consumers, as well as jobs and opportunity.
This is a hot button in California and there’s been lots of chatter on the subject of food deserts in the legislature in Sacramento.
With all the hand wringing over this issue, California remains one of the most unfriendly–and expensive–states to do business. If they don’t give some incentives to retailers, it’s not going to happen.
While it is wonderful to offer fresh produce in food deserts (there are many throughout the US), it will be interesting to see how Fresh & Easy actually fares.
It seems that there are some disadvantages to shopping at Fresh & Easy among this new group. First, for people who may be working more than one job, QSR provides hot, super-fast RTE meals. These meals can be grabbed in the car on the way to work–without missing a beat. Many Fresh & Easy offerings require some home preparation.
Also, price points versus QSR may be challenging. Beat a hot sausage breakfast burrito for $1! And no prep! Especially for a single person or a busy mom, changing habits may be part of the adoption of a Fresh & Easy lifestyle.
I think this one is a big “maybe.” Fresh & Easy/Tesco certainly has considerable experience operating in urban centers. There are operational aspects to survival/success in those markets that are not in the average Albertsons skill set. But Liz Crawford hits the biggest question–does anyone who actually lives in these “food deserts” really care about buying and preparing fresh food? Or is this need more of a political/media creation?
As someone who has actually run a chain of stores focused on urban settings, I can say definitively that there is a huge opportunity waiting for someone who has the stamina and responsiveness to address this grossly under-served market. The customer base in these markets typically lack mobility and are forced to take public transportation long distances to perform even the most mundane shopping tasks. Local alternatives tend to be operations that are over-priced to the point of being predatory and tend to treat the customers with thinly-veiled contempt. Putting in reasonably priced products that reflect the needs and tastes of the local market, along with reasonable service produces a grateful (not a common retail term) and incredibly loyal customer base.
The key phrase above is “reflects the needs and tastes of the local market.” Coming in with a mission to market “what they should have” is a losing proposition. This is retail after all, not a missionary service.
Go where you are wanted is always a smart move. But the question is, why have others not gone before you? Or, maybe have gone before you and failed.
Fresh & Easy may have what people want and need but will the challenges presented by the environment be more costly than the potential for profit? Only time will tell.
The urban concept is a good idea, but for Tesco to really make in-roads in the USA, it first needs to copy the successful formats that its competitors are already doing, instead of worrying about (and focusing their resources on) trying to find a better model. Once they have established themselves, it will be much better and easier to innovate.
Do food deserts offer Fresh & Easy an easier path to success in the U.S.?
> No. (or, if you will, NO!!)
Food deserts aren’t just food deserts, they’re “almost every kind of retail” deserts, and for obvious reasons: low incomes, high operating costs (shrinkage, security, political meddling) and the fear of crime (whether or not it’s real) make it almost impossible to make a profit. That doesn’t necessarily means it’s hopeless but it does mean salvation is unlikely to come from a traditional retailer (and yes, Tesco/F&E IS a traditional retailer, even if they do peculiar things like put extra vowels in their words in press releases).
I won’t say that opening Fresh & Easy stores in food deserts will be the brand’s path to success. But I will say it’s a very smart move, given the obvious lack of food shopping options. Like every smart retailer should do, F&E is attempting to capture a new demo, not only by going where other grocers have largely refused to go, but by also showing they’re a good corporate neighbor by, in part, hiring from the local community. If F&E’s prices are right, then this may be the start of a very happy and prosperous relationship.
Only three of Fresh & Easy’s about 70 stores in Southern California are in food deserts, so the jury is still out on that one.
One interesting thing I read recently is that Fresh & Easy doesn’t accept WIC Vouchers at its stores. This seems strange in terms of locating stores in underserved, low income neighbohroods.
I know of Walmart and Safeway stores for example that take in thousands of extra dollars in sales weekly accepting the vouchers, which are distributed by the government to poor mothers for their kids.
The First Lady’s new nutrition initiative proposes about $500 million in loans for grocers to open stores in food desert neighborhoods. If it passes Congress I think we will see increased activity by grocers to fill these voids. The loan money could be a particular incentive to independents who could use these funds to expand into the underserved neighborhoods. Of course chains like Fresh & Easy can do the same.