Everyone knows Tesco is coming to the U.S. with a new small store format. Just what shape it will take is a bit of a mystery as the only store the company has built to date is safely kept from prying eyes inside a warehouse in California.
While details are scarce, there are a few known details about what Tesco has in store for America. For one, the company plans to spend 250 million pounds per year building small stores in the Western U.S. Reports have had the company looking at a number of major markets including Los Angeles, Phoenix and Las Vegas.
Another thing known is that Tesco is confident. The company said it expects to reach the break-even point by its second year of operating in America. Earlier this month, according to a Reuters report, Tesco Finance Director Andrew Higginson told an investor conference, "It's (U.S. retail market) very competitive. But it is a market where you can get on if you do find a format or form that works. You can have many years of organic growth here."
The British chain is not alone in its confidence. Darrell Rigby, head of the global retail practice for consultants Bain & Co., threw caution and understatement to the wind when he said, "Tesco will redefine convenience stores in the United States."
Mr. Rigby and others believe Tesco's entry into the U.S. will look very much like the retailer's Tesco Express stores in Britain. There the focus is on fresh produce and easy-to-prepare meals consumers can eat on the go.
Tesco has a large rush-hour opportunity, according to Mr. Rigby. Typically, supermarkets are crowded during the evening rush as consumers stream into large stores to pick up a few items for that evening's meal.
"The prospect of being able to do that in a couple of minutes through a convenience store rather than tromping through a 45,000 square foot grocery store ... could be appealing," said Mr. Rigby. "It's just new."
Discussion Questions: What are the biggest hurdles Tesco will have to face when it opens stores in the U.S.? Which of the current convenience or small footprint grocery store businesses in the U.S. are most like Tesco's Express format?