If you’ve ever had a bad day at the office, you probably will empathize with Tesco CEO Philip Clarke who, when asked by a radio interviewer yesterday about the company’s disastrous 199-outlet foray into the American market, replied “I’d rather not talk about it.”
The Guardian’s Andrew Simms takes that demurral as a launching pad for dissecting the failure not only of Tesco’s U.S. expedition but also of what he says looks like a “fundamentally flawed” business model. He compares it, on the one hand, to the sprawl of the British Empire in its heyday and, on the other, to the comeuppance of another overly ambitious martial civilization.
“Having already withdrawn from Japan and shifted to a more cautious gear in China, admitting defeat over North America is reminiscent of another empire -- Rome,” Simms writes. “Once it had passed its peak, it suddenly looked vulnerable.”
Maybe the AP’s Danica Kirka was listening to a different broadcast because she distinctly heard Clarke give something of an explanation for the losses on the American front.
“It's never easy to walk away from something,” Clarke told the BBC, Kirka reports. “The world is so different now from 2004 and 2005 when the research was originally taken. Who was shopping on a smartphone back then?”
In any case, Tesco formally threw in the tea towel on its U.S. venture yesterday after booking a loss of $1.8 billion. It hopes to sell the chain, with stores in Arizona, California and Nevada, intact. Good luck with that, say analysts such as Planet Retail’s David Gray, according to the Los Angeles Times’ Tiffany Hsu.
“Instead, [Gray] said, potential buyers such as Aldi Sud, Family Dollar Stores Inc. and Dollar General Corp., as well as possibly some drugstore companies, may try to snap up chunks of the chain,” Tsu writes. “Fresh & Easy's small size -- about 10,000 square feet per store -- may make it unappealing to big-box warehouse retailers such as Wal-Mart, whose average super center is 182,000 square feet.”
Allyson Stewart-Allen, head of International Marketing Partners, told the BBC’s “Today” program that “Fresh & Easy just didn't look like an aspirational product. Americans don't want to be told they're on a tight budget, and Fresh & Easy's concept was all about people on budgets.”
It was also “very confusing,” she says. “You had champagne next to ready meals next to merchandising. It was a very confused proposition for Americans who couldn't work out what exactly they were.”
The Independent’s Simon English blames it all on Sir Terry Leahy, the former Tesco CEO, whose “final, hubristic act as boss of the supermarket was to lead a charge into the U.S., presumably on the assumption it is a nation desperately short of food, where folk just don't eat enough.”
Masses of research supported “the line spun by Tesco to UK hacks and analysts,” English continues, that “U.S. supermarkets [were] no good.” Balderdash, he asserts, by and large they are better -- and a little chain called Wal-Mart seems to have a handle on the market.
(If you need further proof of Leahy’s hubris, consider this tidbit from The Telegraph's Rachel Cooper: “I actually bribed my children to sort of inform on my wife Alison if she popped into [rival supermarket] Waitrose when she picked up the kids from school,” Leahy said in a radio interview in February.)
And if you are looking to draw larger lessons from Tesco’s demise in America in the face of ever-expanding grocery aisles and the heavily marketed items that fill them, the Guardian’s Simms suggests that “we have entered a period of great economic questioning” about overconsumption that is “largely detached from consequences.”
“Pictures of smiling people and happily grazing animals on packaging bear as much relation to reality as did the joyous workers and natural abundance in Stalin-era paintings of Soviet realism,” he writes.
That may be, but as Shore Capital analyst Clive Black tells the Sun’s Steve Hawkes, Tesco “didn’t do their ‘homework’ on what Americans wanted. Americans have got big cars, big freezers, often big bellies and Tesco tried to make a go of something akin to a Tesco Metro convenience store,” he maintains.
Which is why I personally think Stewart-Allen’s theory about aspiration makes more sense than Simm’s theory about a looming austerity. Whatever you do, don’t take those happily grazing animals off our food packaging -- or off our dining room tables, for that matter.