Thinking global. Competing local: Two of retailing’s toughest competitors take their convenience store battle to Vegas

LAS VEGAS —When Tesco and Wal-Mart are neighbors, who wins? That depends upon what you mean by “win.”

Tesco’s Fresh & Easy and Wal-Mart’s Neighborhood Market are just across the street from each other in at least two Las Vegas locations, with the Tesco stores sidling up to the Wal-Mart units over the past few months. However, at the location near McCarran Airport, the merchandising at Fresh & Easy just doesn’t measure up to Neighborhood Market. Indeed, as an overall store concept, Fresh & Easy just doesn’t have the same amount of appeal.

By McCarran Airport, Fresh & Easy’s streetside sign is tiny and hard to spot from a passing car, while Neighborhood Market’s is pronounced. Fresh & Easy just might have it on Neighborhood Market when it comes to the exterior signage and decor, though. Tesco’s is stylish, but the color package doesn’t do much to improve Fresh & Easy’s bland interior. Neighborhood Market is more traditional grocery inside, but the decor is handsome and inviting. Tesco has said that it has begun introducing brighter signage and decor touches in its newer stores and, in announcing a range of new products earlier this month, said it will continue to liven up stores going forward.

On a department basis, Fresh & Easy slips further behind Neighborhood Market. Its wine department, perhaps the best merchandised section, still seems a little uninspired and picked over, while Neighborhood Market’s is more attractive and better maintained. Fresh & Easy carries Vista Point, a wine label that, as it says on the bottle, is produced for the chain. Vista Point is, in essence, Tesco’s version of Trader Joe’s Two-Buck Chuck, even if it was $2.99 in Vegas. However, Neighborhood Market offers a $1.97 wine assortment on an endcap near the store entrance that clearly is counter-programmed with what Fresh & Easy provides for the budget consumer.

Produce, the department where U.S. consumers are most likely to pass judgment about food retailers, is clearly a plus for Wal-Mart, which offers a much larger assortment. Neighborhood Market also mounts better-maintained displays where the sun doesn’t beat down on the fruits and vegetables through the front windows.

Storewide, Tesco suffers from worn floors, and its out-of-the-carton shelf ambience is less than flattering.

Even in the takeout area, Neighborhood Market’s presentation is far more attractive than Fresh & Easy’s. To Tesco’s credit, many who have sampled its takeout food give it high marks for quality and flavor, but the merchandising of takeout items doesn’t sell the product.

And Fresh & Easy’s self checkouts are a challenge to face, too. While the wine presentation is significant—and Tesco’s Express units in the United Kingdom are expertly merchandised to coax food purchasers to add a bottle of wine or beer—a Fresh & Easy attendant has to punch in a code before a customer can put through an alcoholic beverage purchase, an inconvenience when the store is even a little busy, as many customers seem to need assistance getting products checked out.

Merchandising is only one issue as regards the Fresh & Easy/Neighborhood Market pairing. If you are talking about drawing power, Tesco wins. Fresh & Easy units don’t draw from as far a field as do Wal-Mart’s Neighborhood Markets. In a study, market research firm Buxton determined Fresh & Easys draw from a driving range of less than five minutes, while Neighborhood Markets draw from six to eight. So, the difference is significant.

Tesco has looked for retailers to pull customers into the vicinity. One consultant who worked with Tesco said it tried hard to pair Fresh & Easys with drug chain units, although they, as with Neighborhood Markets, compete in some key categories. In contrast, the head of a major retail chain said he didn’t see the point in landing on the same pad with Fresh & Easy. It didn’t look like enough of a draw for his stores. All that evidence suggests pairing with Neighborhood Market is a plus for Tesco.

Buxton has store location analysis among its practices and, although Tesco is renowned for its store savvy in the United Kingdom, Buxton evp Todd Walls said that its location strategy in the United States, on examination, lacks consistency. “There’s no rhyme or reason,” he said. “It’s almost like they decided on going through what’s out there and seeing what sticks. What doesn’t, they fix. It’s almost impossible to say what, going from store strategy perspective. It’ll be a challenge for them.”

The new products and merchandising that Tesco has announced it is introducing may help its cause long term. But in terms of store strategy, the British retailer doesn’t seem to have a firm grasp of the U.S. market and, on a May afternoon in Las Vegas, Fresh & Easy merchandising made Neighborhood Market look good.