A new report suggests that Safeway has developed a response to Tesco's Fresh & Easy entry into northern California and its answer is the development of a small format store similar to its competitor.
John Machado of Collier's International brokerage told the San Jose Business Journal that Safeway has discussed opening a smaller format store for some time. The grocery chain is reported to be looking at a number of locations in the San Francisco Bay area.
Safeway will need to compete not only with Tesco's fresh and prepared foods but also its prices. According to TNS Retail Forward, a comparison of eight food items purchased at a Fresh & Easy store in Los Angeles found that Tesco's market basket rang up for less than $20 compared to $24 and up at Albertsons, Kroger and Safeway.
Melissa Plaisance, a senior vice president of finance and investor relations for Safeway, said too much shouldn't be read into the chain looking at stores with a smaller footprint.
"Clearly we are aware of Tesco's entry, and we are watching their activities closely," she said. "But all we do is rooted in consumer research, and we do realize that there are different kinds of shopping trips."
Discussion Questions: Do Safeway and others need to develop small store formats to compete with Tesco? Why do small store formats now seem to make sense when they apparently didn't before Tesco made its plans to enter the U.S. market public?