In U.S. debut, Tesco makes Easy work of ‘Fresh’ openings

LOS ANGELES —Tesco’s arrival in the United States last week marked one of the most anticipated retail launches in more than a decade, but now that it’s here, Tesco has to prove it can execute its strategy and reverse a trend of British retailers failing in the United States.

Tesco made a big splash in Southern California on Nov. 8, opening six Fresh & Easy Neighborhood Markets in Los Angeles, Anaheim, West Covina, Hemet, Upland and Arcadia. It has a second round of five openings due on Nov. 14 in Las Vegas, and expects to open stores in Phoenix and San Diego by the end of November.

All told, Tesco should have about 30 stores open by the end of 2007 as a prelude to 80 openings scheduled for 2008 and up to 350 by 2010. Fresh & Easy ceo Tim Mason said stores would target “underserved communities” with a focus on Hispanic fare—all six of the first U.S. stores are in communities with large Hispanic populations. The 10,000-square-foot stores will also carry health-conscious products and no cigarettes or tobacco.

While key competitors like Safeway and Supervalu have said little about Tesco’s entry into the United States, analyst Mike Griswold of AMR Research warned against taking Tesco lightly, given its track record in a dozen countries around the world.

In a recent report, he noted that “Tesco’s record for entering new markets is 11 to two—it only stumbled in France and Taiwan.” And he added it has a reputation as a giant killer. “In Japan, Carrefour exited the market two years after Tesco’s entry and in South Korea, both Wal-Mart and Carrefour have exited due largely to Tesco’s performance in the region.”

But its move into Southern California—arguably the most competitive region in the country—comes against a backdrop of past failures among British retailers coming to the United States. The most recent example is Laura Ashley, which launched 30 huge flagship stores in the early 1990’s but was out of business by 1997. In 1987, British retailer Dixon’s bought the 119-store Silo chain—the third-largest CE retailer in the United States at the time—but sold it at a loss in 1993.

But Tesco believes it has a winning formula. It opted to go with a smaller format that puts it in competition with retailers like Trader Joe’s, and it offers an attractive package to prospective employees. It includes a starting salary of $10 an hour in California, health benefits for employees who work more than 20 hours a week and a 401-K plan. Tesco said it received 1,000 applications to fill 170 positions at the six stores that opened last week.