Tesco's Fresh & Easy: A $10 Billion U.S. Business by 2015?

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Tesco's Fresh & Easy: A $10 Billion U.S. Business by 2015?

LONDON -- Tesco could be a $4 billion retailer in the U.S. by 2011 with 500 stores, TNS Retail Forward predicted in a recent report. And by 2015, sales could reach $10 billion, positioning Fresh & Easy among the Top 10 supermarket retailers in the U.S.

The report, released late last week, cited Fresh & Easy's convenience-focused format, which offers smaller stores, easy access, more ready meals and grab-and-go items, combined with rapid expansion across the U.S. to be key sales drivers.

Fresh & Easy's concept fulfills several shopping modes and occasions, including fill-in trips, immediate consumption and quick replenishment, the report stated.

TNS Retail Forward, which is part of TNS' Retail & Shopper Insights, believes the chain's small-size advantage allows it to almost double space productivity per square foot compared with supermarket industry averages. The average size of a U.S. supermarket is more than three times that of Fresh & Easy's 10,000-square-foot store.

It is predicted that Fresh & Easy could generate sales of $900 per square foot per store, nearly twice the supermarket average, TNS' report noted.

"The combination of Fresh & Easy's smaller stores, self-service tills and ready-to-cook meals has direct appeal among U.S. shoppers whose primary concern is convenience," Jennifer Halterman, senior consultant at TNS Retail Forward, said in the report. "There is demand for this type of concept, and we expect other U.S. retailers to be watching Tesco closely for ideas on how to tap into this buoyant market. Fresh & Easy's smaller store size gives it an ideal formula to replicate quickly throughout the United States."

Fresh & Easy stores also aim at a variety of shopper segments. They attract the value shopper through affordability, as well as the upscale shopper through a gourmet offer. Unique merchandising and marketing tactics are also pluses, according to the report.

"The biggest driver of the Fresh & Easy philosophy is the prepared foods selection, with stores dedicating a quarter of their 'fresh' area to these products," said Mary Brett Whitfield, senior vice president with TNS Retail Forward and director of the Retail Forward Intelligence System. "The idea of having 'ready-to-go meals' that are high-quality, fresh, healthy and cost- effective means that this type of meal option has the power to directly compete with restaurants. Fresh & Easy's arrival is part of an unfolding shakeup in the competitive food retailing landscape."