Food for Thought

September 20, 2007 - 12:57

Giant U.K. Retailer Comes to America

Tesco PLC, which operates a retail chain in the United Kingdom is planning to enter Wal-Mart’s home turf — even though the United States is considered over-crowded with stores. This fall, Tesco will debut on the West Coast with its “Fresh & Easy” brand of neighborhood markets. The retail giant plans to open 30 stores by the end of 2008, with more to follow.

Smaller than the usual grocery store, the 10,000-sq.ft. stores will be easily accessible and offer everything from everyday necessities to gourmet items. There will be plenty of fresh food choices including pre-prepared and organic foods to make healthy eating easy and affordable.

Knowing their customers is a big part of how Tesco operates. To develop their U.S. model, Tesco sent teams to live with American families and catalog their shopping habits. One finding from their research is Americans visit many stores and are not one-stop shoppers. Even though the U.S. market is perceived as crowded, Tesco feels it is a place where innovative retailers get recognized by consumers and rewarded for it. Instead of buying an existing chain, Tesco chose to research and design the perfect store for the 21st century American consumer.

Tesco aims to be a good neighbor and has developed a community plan that includes initiatives about open sourcing, nutritional labeling, energy conservation and recycling. LED lighting in stores and solar panels in warehouses will be employed along with the most recent cooler and freezer technology to reduce energy consumption. They will also structure their delivery schedules to minimize noise and congestion. Tesco is also committed to developing staff from the local area and participating in community activities.

Fresh & Easy has recently entered an agreement with the Resource Management Group to design a world-class recycling and waste-reduction program. Fresh & Easy will recycle or reuse all of its display and shipping materials. Because of its commitment to health, cigarettes or tobacco products will not be carried. Cut flowers and potted plants along with seasonal plant material are expected to be an integral part of their product mix.

 

Supermarkets Avoid Wal-Mart Model

After years of decline brought on by fighting Wal-Mart Stores on price, the nation’s grocery stores are changing tactics and winning back shoppers. By sharpening their differences with price-obsessed “supercenters,” stressing less hectic stores with exotic and hard-to-match products and above all, convenience and service, reported the Wall Street Journal. So far, the success may be relatively modest, with grocery stores that had been open at least one year posting a slight 4 percent sales increase, according to retail consultants TNS Retail Forward. Even more telling may be the announcement in June by Wal-Mart that it would cut back on proposed supercenter openings.

In an attempt to sidestep Wal-Mart, WSJ reported, grocers are cutting back on well-known Wal-Mart strengths like health and beauty products and are instead emphasizing fresh produce, higher-quality meat and easy-to-prepare foods. Instead of rows of aisles with common brands, these retailers are adding tables with ingredients for planned meals, luring the kind of customer who shops for dinner instead of stocking up once a week on groceries. The key to this philosophy is behaving less like a supplier and more like a packaged goods company.

 

Big Boxes Aim to Ease Shopping Experience

The average Wal-Mart shopper spends 27 minutes in the store and finds only seven of the 10 items on his or her shopping list. One key to boosting sales is helping the customer find that eighth, ninth and tenth item, reported the Wall Street Journal. In an attempt to make their sprawling stores easier to navigate, the newspaper recently stated that Wal-Mart is installing better signage to help customers find merchandise, more convenient placement of hot-selling items and staffing changes to speed checkout. Other “boxes” such as Home Depot and Best Buy are also pursuing a goal of making their stores less overwhelming for shoppers. Eliminating the seemingly never-ending checkout lines is now a priority in making the shopping experience more convenient for busy customers.

Focusing on convenience represents a turning point for big retailers, according to the Wall Street Journal. For many years, they kept building bigger and bigger boxes, figuring the combination of low prices and huge product assortments outweighed any other considerations the customer had. The result however is that shoppers often spend much of their time trudging from department to department to find items on their list and give up before finding all of them. Americans make 127 million trips to Wal-Mart each week, reported the same Wall Street Journal article. If each of them buys one or two additional items, it results in huge sales increases.

In addition, the Wall Street Journal reported how several big players are implementing tactics to make their stores less intimidating:

  • As a test, Best Buy is employing “personal shoppers” in 60 stores who are knowledgeable about all products in the store. Their job is to serve time-starved customers making complicated or multiple purchases.
  • Circuit City is outfitting sales people with computer tablets hung from their shoulders. They will use the tablets to call up product information for customers and compare features of various merchandise.
  • Target Corp. has attempted to make shopping easier for expectant mothers by clustering baby clothes, baby food, strollers and diapers in the same department.
  • Lowes frequently checks lighting levels to ensure the bulbs haven’t dimmed over time. Lowes also installed “need help” buttons where shoppers often require assistance. The average response time is less than one minute. Home Depot also tested call buttons this year and is now installing them in all its stores.

Checkout is crucial because American consumers are not known for their patience. A 2006 survey by the Mystery Shopping Providers Association found that the average checkout time for grocery stores was 4.27 minutes, 4.55 minutes at apparel stores and 5.23 minutes at department stores. Still, “hurried customers bristle at the wait times and often perceive the delays as longer than they actually were,” reported the Wall Street Journal.

Navigating jammed aisles and then waiting to check out is perceived as not worth any price savings by the average consumer. Using a computer-modeling system to schedule cashiers resulting in less checkout time during peak periods has resulted in sales gains for Wal-Mart. Some retailers such as Costco have added technology that allows customers to swipe credit cards before their entire purchase is rung up. They have also opted to incur $40 million in annual expense to augment staffers who box merchandise and load it into customers’ cars. The result: Costco’s average hourly transactions have increased to 45 from 37, reported the WSJ.

Some big box stores have employed the most “controversial checkout-line evolutions” — the self-checkout area — where up to four shoppers can scan their own purchases under the supervision of one cashier. Home Depot has installed self-checkout in all its stores and Costco is experimenting with 30 of its stores. Some retailers however have eschewed the self-checkout as clumsy and confusing for shoppers, maintaining that one professional checker is as fast or faster than four self-checkout machines.

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