Tesco Goes Where Big Retailers Fear to Tread: Inner City LA

U.K. grocer Tesco (TSCO) is executing an urban strategy in South Los Angeles by adapting its Fresh & Easy stores to inner city neighborhoods that have scared off its rivals.

Although some observers thought it had gone suburban when it debuted in the U.S., Tesco actually had a city strategy all along. The marching bands that turned up for its Fresh & Easy opening last week in LA demonstrate that locals appear to appreciate it's appearance in the lower income "food deserts" where it's adding stores.

For one thing, the location at the corner of Adams and Central has no immediate competition from major supermarket chains, Fresh & Easy spokesman Brendan Wonnacott told me. That provides the store with several advantages. For one thing, Fresh & Easy prices, already as good or better than those at supermarkets that compete with it in the Southwest, should prove particularly attractive in a community that is served primarily by local food retailers who don't have Tesco's buying power.

For another, at a time when consumers are being pressed from all quarters to eat healthier, Fresh & Easy provides a full line of produce and other healthy fare. To link price and the availability of healthy fare in the recession, Fresh & Easy developed the 98 Cent Produce Pack, and it proved popular with consumers.
On top of that, Fresh & Easy has been using customer feedback â€" solicited frequently through Twitter -- to tailor its assortment to local tastes. Early on, the retailer tended toward trendy if well priced fare, but lately it has been making moves like adding breakfast burritos and multiserving family dinners. As Fresh & Easy has evolved, Tesco has focused its operations on everyday needs that has the broadest possible appeal, which has allowed it to move into urban neighborhoods with a fair chance of meeting customer expectations.

"Because we have stores in every type of neighborhood, when you look at the façade and the layout and the products, it's the same as you would find in Pasadena," Wonnacott said. "The big difference is in the quantity of certain items in this neighborhood that is 80 percent Spanish speaking."

South Los Angeles isn't Fresh & Easy's first urban location, not even in The City of Angels. The retailer opened a Compton store two years ago. Yet it was among the first scouted by the chain and by CEO Tim Mason himself, as Wonnacott relates it.
Many supermarkets avoid inner city environments, usually citing security as an issue. In fact, a combination of local government issues, employee turnover, delivery complications, shrink and insurance challenges act in combination to put off retailers.

One of the reasons the new store took so long to start up was that Tesco placed it in a mixed-use commercial and residential development supervised by the City of Los Angeles -- and so things then proceeded at a municipal pace. Tesco didn't take government funds, though.

Beyond that, the smaller property, a lighter on-site inventory and and an abundance of workers in the aisles helped mitigate some of the related urban issues of security, distribution and insurance for Fresh & Easy.

With small stores and a product assortment designed to meet everyday needs of its localities, Fresh & Easy can fit into city slots that wouldn't suit a lot of its competition. Looking to the north, Tesco has been adding stores and securing locations for urban operations in Sacramento, San Francisco and the city of Fresno. Results in its urban locations so far has been good enough to keep Fresh & Easy expanding in the inner city environment.

Photos courtesy of Fresh & Easy Neighborhood Markets