When you think about London, the obvious landmarks come to mind: Big Ben, Buckingham Palace and the Tower Bridge But there is an unofficial staple in the UK. They extends. Well beyond the country: Tesco. It’s the largest retailer in the UK with over 3,400 stores. The brand has been met with success abroad in Europe and Asia with international operation profits of over half a billion dollars in 2018. There are more than 6,500 stores worldwide, but there’s one place at the UK retailer just didn’t take off: the United States Tesco announced its U.S. Expansion in 2006. And at the time, Tesco was the third biggest retailer on the planet. But the brand just didn’t click with Americans. Tesco left the U.S. in 2013 when it sold off its remaining stores to Yucaipa companies. To understand why Tesco failed in the U.S., let’s go back to the company start. Tesco got its start in 1919 when Jack Cohen began selling surplus groceries from a stall in London’s East End. The first official Tesco store opened ten years later with the idea of bringing affordable foods to the people of Great Britain. In the 1930s and 1940s, Tesco expanded across London and the suburbs. Tesco went public on the London Stock Exchange in 1947 and in the 1950s, they opened its first supermarket. Starting in the 1990s, Tesco set its sights on global expansion. Tesco had stores in the Czech Republic, Poland, Ireland, Thailand, Malaysia and India. By 2007, Tesco had over 1,300 stores in 12 countries. In that same year the company invested roughly $500 million to establish operations in the United States. And In November of 2007, Tesco entered the U.S. Market. Instead of going by the name Tesco, these stores opened under the name Fresh & Easy. The name was supposed to introduce Americans to what they would expect from shopping at Tesco in America, fresh food at a reasonable price. It also had small store formats to make shopping simpler and they offered lower prices under its company-owned labels. For Americans, the shopping experience at Tesco is a lot different from what they were used to. Fresh & Easy stores were a fraction of the size of the average American grocery store. They were designed for the kind of consumer who shops daily. They were more ready to go meals for consumers than your typical American grocery store. And there are lots of self-service checkouts. The format of typical American grocers are really big compared to Tesco’s. They are designed for a shopper who shops in bulk and on a weekly basis. That means checkout counters are typically staffed with clerks and baggers and there are more brand names on shelves and there isn’t nearly as big an emphasis on ready to go meals The designation Fresh & Easy is actually a very good sub-branding In other words, Fresh & Easy, you know pretty much sums up the two key attributes that they were selling a freshness of the product and convenience. The first of Tesco’s 53 fresh and easy stores all launched in the West in states like, California, Arizona and Nevada. So, how did Tesco come up with its strategy for the U.S.? They actually embedded with the American consumer before entering the market. Tesco sent executives and Anthropologists to live with families in the U.S. to get a sense of how the typical American family spends their money on groceries. And they thought a large number of people, maybe 40 people into California, to research the market. These people did not research the market very intelligently. They understood they culture to a degree. The concept of these Fresh & Easy stores, the small convenience store, with Fresh & Easy food. You know, that was something that would work in London with Tesco Express, but wouldn’t work so easily in the LA area. And that Tesco speak in the United States, they had 208 Fresh & Easy Banner stores and all were in the West. That was actually well below expectations. Tesco initially planned to open 200 stores by the end of 2008. But it ultimately wanted to open 1,000 stores. But by 2013, the retailer was hemorrhaging cash in its first five years in the U.S. The company racked up losses of over a billion and a half dollar. Are sales improving on a weekly basis? Every week. Are they meeting Tesco’s original targets? Our sales are improving every week and we’re very happy. We’re exceeding budget. You’re exceeding budget? We are exceeding our budget. You’re making a profit? We are… I didn’t say that I said we’re exceeding our budget. Tesco anticipated It would finally break even in 2014, but the brand decided not to wait it out. It announced in April 2013, that Tesco would exit the U.S. market What went so wrong with Tesco in the U.S.? When Tesco launched in America its stores were all located in the West. At the time they decided to enter the U.S. market, they just done their research. They had found that per-capita spending at supermarkets in the western states, where they had targeted, was was higher than any other region in the country. Actually about 15% higher than the national average in 2007. But then the financial crisis of 2008 hit. Like many other companies, Tesco didn’t see the Great Recession coming. Where two of the core metropolitan areas that they had decided to focus on were Phoenix and Las Vegas. When the recession hit, the economy in those two metro regions crated Subprime mortgage crisis and the Great Recession was gonna be bad news for anybody. But their particular geographic focus in the West meant that it was particularly bad news for them. Tesco’s locations also happen to be in some of the states affected most by the Great Recession. Arizona, California and Nevada saw unemployment rates that are higher than the national average. Consumers in these states also cut back on spending and when they did spend they went to retailers that offer the lowest price as possible. But just in general, in terms of entering the market, in terms of the recession, this is a really bad time to kind of have this message that fresh and easy espouse of having a fresh and healthy products and a competitive price. Because as consumers look to stretch their budgets as far as possible when the recession hits, they turn to well-known retailers that have long-standing reputation for low prices. These stores were also in areas where there wasn’t much foot traffic. So they ending up acquiring leases on a large number of properties there were basically on the wrong side of the road. In other words, they were on the inbound commuting side of the highway instead of the outbound or going home side of the highway. So you can see immediately that you know people are gonna go straight by them on the way into work when you want to go and to get some to eat on the way home from work, they’re on the wrong side of the road. Geography was only part of the problem. Tesco also faced pushback by the American consumers. The Fresh & Easy stores didn’t embrace the idea of the classic American grocer. Instead they embraced Tesco’s British style of food shopping. American grocery shoppers tend to gravitate toward larger stores that have everything under one roof. But the Fresh & Easy chains were approximately one-fifth the size of the typical American grocery store. The reason for the smaller store footprints is because Tesco’s typical shopper shops at the store daily. Smaller stores make it easier for shoppers in the UK to grab what they need on the day-to-day basis and go home. But American consumers tend to grocery shop in bulk on a weekly basis. Plus, the Fresh & Easy stores also place a substantial focus on ready to go meals which are a big seller in the UK and Europe. Tesco built a massive distribution center in Riverside, California complete with the commercial kitchens that helped churn out these prepared meals. But Americans are more accustomed to ordering takeout for cooking meals themselves. Then there were the safety issues with Tesco’s food that turned away American shoppers Fresh & Easy stores offered produce that was wrapped together in cellophane bundles. Now consumers in the US, however, and that might have worked in the UK or in Europe, but consumers in the U.S. they’re picky when it comes to getting their produce. Because people want to be able to touch their produce before buying it. However, because the the food was wrapped or the produce was wrapped in cellophane, people weren’t able to do that. And additionally, if they wanted, for example, like one item like one onion or one bell pepper. They were not able to do that. They would have to buy it out of it and wrapped with multiple items. Tesco’s Fresh & Easy chains didn’t go after big retailers like Target and Walmart. They tried to target a niche market of consumers. But the stores just simply didn’t resonate with American shoppers. In the end, Tesco pulled out in 2013 at the cost of several billion dollars. They sold off its stores and its distribution and production facilities to Yucaipa companies. Yucaipa acquired more than 150 store locations, although others were shuttered by Tesco. Tesco also ended up loaning Yucaipa companies $120 million to take over the Fresh & Easy brand. But just two years later after the sale, Yucaipa began to close down the remaining Fresh & Easy stores and in 2015 the company filed for bankruptcy. CNBC reached out to Tesco about the company’s time in the U.S., but the company did not respond to any questions. But Tesco isn’t the only British supermarket to fail in the U.S. Sainsbury’s exit the U.S. in 2004 and Marks & Spencer’s called it quits in 2006. So Tesco’s ill-fated attempt to break into the U.S. wasn’t totally unprecedented. But it did turn out to be one the biggest failures yet and resulted in major losses for the UK retailer.

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100 thoughts on “Why Tesco Failed In The United States”

  1. Oooooiiii!!!!
    Rubbish, we do not shop daily in the UK…..
    We are simply smarter than your average American shopper

  2. Oh damn, I didn't know Fresh and Easy was Tesco. I was saying to myself at the beginning of the video that I've never seen a Tesco here in the states, but I guess I have.

    I liked Fresh and Easy. I remember them being kind of expensive though.

  3. that 10 list that's global store something i only know one or two of them lol i never see them here or went to them. maybe its only in the west

  4. 6:57 actually they're British, so I know what happened ! hahahahaha ! #IndianHere.

    If someone didn't get it reply 🙂 :P.

  5. I loved Tesco in London but not here in the US. My local HEB has way better food and a bakery and deli that cater to the Hispanic population here in Texas. Tesco is too bland to work here

  6. Perhaps because Target and Walmart are so well known here? I visited Tesco's in the UK and it kind of reminded me of Target in a way.

  7. When I lived in Las Vegas I shopped at Fresh and Easy. The pricing was lower than anywhere else. Tesco was selling stuff at cost to pad sales so they could sell the store. When Fresh and Easy was sold prices for everything shot up at the stores. The company that bought fresh and easy tried turning them into large coffee shops with super high priced items. It was just weird.

  8. Location, location, location. Most of the Fresh & Easy stores were right across the street from the big named Supermarket. None were in areas where there wasn't an already established "super" market. Places like South Sacramento, Florin, Oak Park (they finally got a Food Source), didn't even have supermarkets. IIRC, there was one Walmart in the area built on the old Florin Mall. The old Walmart about 1 mile down the street eventually turned into a Walmart Neighborhood. Fresh & Easy was about double the size of a convenient store (7-Eleven or Circle K). Again, had they put these in areas where "fresh" food wasn't available, they would have done a whole lot better.

  9. Is it just me that wonder why Tesco did not target a city like NY?! I think their business model would work there.

  10. I dont get it. When I go to the UK I love Tesco. I think they should've tried it out in smaller Texas places. Aldi is booming here and most people had never heard of it until they simultaneously built multiple stores here.

  11. We kicked the British out in 1783, 2004,2013 but they keep coming back to us. Why can't they just leave us alone?

  12. Not all European super markets fail. Trader Joe's is owned by one of the Aldi's and is quite successful. In fact they have a bit of a cult following in the US. The other Aldi has also entered the market as kind of a lower cost Trader Joe's. I assume they are doing okay because I know of a couple of stores that have been around for decades. Lidl has entered too. The trick is changing to fit the market. Americans expect to be able to touch our produce (which can be a problem as produce that are fine but have small cosmetic blemishes will not sell and may need to be thrown out.) Also we expect the clerks to bag our groceries for us. Aldi does get away with not bagging your groceries but they market it as a fun quirky European thing.

  13. You tried to sell fresh produce to fat people who want fried cheese on fried grease. That being said, Tesco were wise to use the name 'Fresh & Easy' so that when they inevitably try again sometime in the future, they can use the 'Tesco' name.

  14. Aww!! I loved our Fresh & Easy!! I think they might of been ahead of it's time though… ): ours is a CVS now /:

  15. Tesco tell a lot of Lies……….
    overpriced profiteering don't care about their staff……..

  16. Do you know what grinds my gears, every American says everything like buckingHAM palace and WolverHAMpton, and I hate it

  17. Fresh n Easy was terrible. They all shut down near me because there were legit protests from employees outside. My family tried shopping there but we stopped because the food was gross!! Lmao!!

  18. My brain did a word scramble and read “Costco” even though the amount of letters needed weren’t there

  19. Americans buy groceries for the whole family once a week so bulk is a bargain .California is not typical America . They should have researched Middle America

  20. Choosing a name like fresh and easy which to Americans is reminiscent of a high end grocer like Whole Foods while wrapping up their produce in plastic wrap was just a marketing shitshow. Also there is not a single successful supermarket brand in the US that has a more than three syllable name.

  21. Americans are more loyal to big stores like walmart..They don`t want some stupid greedy foreign stores like Tesco popping up.

  22. It's strange how the German grocery chain Aldi does so well in the US under the name Trader Joe's. Most people have no idea Traders Joe's is part of a German supermarket chain.

  23. This video would have been half as long if you hadn't repeated the same information over and over and over again.

  24. Tesco products are fantastic, I wish Tesco existed in every country. And no, I'm not British.
    Tesco should look to Eastern Europe and Asia. Much easier markets.

  25. I shopped at a TESCO when I was travelling in Northwest London, and it was equally awkward. One foreign store which aced it in the US is Aldi; they're a game-changer here in Florida, and I much prefer the German-style store experience than the British one.

  26. TESCO HAVE BEEN RIPPING OFF THE BRITISH PEOPLE FOR YEARS!!!
    THEY WILL ALL CLOSE DOWN SOON 👍👍👍☺☺☺
    GREAT 😂😁😃😁😂😃

  27. "Americam rather cook themself……end of quote"….ahahahaha!
    Show me one USfemale who likes to cook…..why there is the closest Net on Fastfoodchains worldwide in the US?

  28. If I remember correctly they stated wanted to serve the underserved communities, I wonder why established chains stay away from these communities. Huge miscalculation. Underserved communities translation: very poor communities currently being served by food banks.

  29. They should have put them closer to college camps and downtown where people like me would be. I miss fresh and easy

  30. As an American I can say that the majority of us do prefer to shop in large grocery stores where we can get everything. It would be such a pain in the ass to have to go to multiple grocery stores to get all my food. I believe American culture is more of a constant on the go and most people don't have time to go to a grocery store every day. For example I buy a weeks worth of food, meal prep and make about 4 days worth of cooked food at a time.

  31. I loved shopping at Fresh & Easy. Due to having a busy schedule & my job starting in the late evening, it was convenient for me to stop by there & buy a meal. They had many healthy options there & a section of discounted food close to expiration date like sandwiches & other stuff that I'd buy & eat that same day. I was sad when they closed.

  32. aw man, I had no idea! I loved fresh & easy! Even Kroger is now all ginourmous stores. not everyone wants to walk miles for a toothbrush and milk

  33. I've been to Tesco in the UK. The quality and selection would rival a Wal-Mart here in the US because it is far superior. They should have actually marketed their actual Tesco brand and the Northeast would have been a great market for them. I would welcome a Tesco here any day. Unfortunately, they went for the wrong niche market.

  34. Fresh and Easy was expensive and small and not alot of options. An American's mostly buy in bulk for 2 wks to a whole month. They also put them in low income areas. Not very smart.

  35. Tesco entered Turkish market by buying Kipa brand in Turkey which was local supermarket chain in western (mainly Aegean region) Turkey. Prior to that Kipa was a lovely place to do shopping. With Tesco, it lost its soul. Years later, Tesco sold the Kipa brand to Migros and that was the end of Tesco in Turkey.

  36. I refused to go. The name they used Fresh and Easy sounded expensive like New Seasons. I never saw a commercial either. When you say fresh. It’s a expensive word. If you are looking for lower income people. You need to be like Walmart, Winco, Frys. Etc

  37. There was a Fresh & Easy store near my house. It was actually a great little neighborhood market. My partner and I loved the ready made meals but there just wasn't enough neighborhood to support it. People didn't use it as a primary market either. People used it like a large, well stocked convenience store. They forget one or two items on their main grocery trip to WalMart or Smith's and they would pick up one or two of those forgotten items at Fresh & Easy.

  38. Wow- I’m shocked that Fresh & Easy was actually Tesco!! I’m from California and I loved Fresh & Easy! Their quick meals, especially the sandwiches, were my go to. I was so sad when they closed.

  39. Tesco in the UK used to own Giraffe restaurants, Harris & Hoole coffee shops and Debbie’s Garden centres. All sold off now!

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