Tale of Two Supermarkets: Why Fresh & Easy Flopped and Fairway Flies High

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Fairway Group Holdings Corp. signage is displayed in front of a market in New York, on April 17, 2013.

This week, the death of one high-profile grocery chain, and the ascendancy of another, tells us a lot about what Americans want in a supermarket—and what we’re just not buying.

On Wednesday, Fairway, the beloved New York-centric supermarket chain, went public, and shares of the company quickly shot up 39%. Born as a produce stand on Manhattan’s Upper West Side, Fairway now has a dozen locations, and it plans on opening as many as 300 stores around the country.

Also on Wednesday, news spread that Fresh & Easy, the supermarket brand launched in the U.S. five years ago by Tesco, Britain’s biggest grocery company, was officially a failure. Tesco announced it would cut its losses on Fresh & Easy, taking a write-off of roughly $1.8 billion. The 200 existing Fresh & Easy stores, all in the American West, are up for sale.

Most would agree with Philip Lempert, editor of Supermarket Guru, who said in a phone interview, “Tesco is one of the smartest retailers on the planet. They’re not a dumb company at all.” And yet, as Burt Flickinger III of the retail consulting firm Strategic Resource Group put it in a Los Angeles Times article, “Tesco’s failure will rank as one of the biggest among food retailers in modern supermarket history.”

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What happened? And what has Fairway done differently that has it headed in exactly the opposite direction of Fresh & Easy? While both are in the same business, Lempert said, “They really represent the two extremes of what’s going on in grocery retail.” Here are a few of areas where the differences are readily apparent.

Understanding Customers & Locations
The first Fresh & Easy opened in the U.S. in 2007. Tesco originally planned on having 200 stores by the end of 2009, and upwards of 400 locations by early 2013. Instead, by the fall of 2010, when the total stood at 168 U.S. locations, the company announced it was “mothballing” 13 stores, including six in the Las Vegas area.

In fact, every Fresh & Easy has been in the western U.S. Tesco seemed to want to avoid battling for customers with Walmart in its Midwest heartland, and also skipped over the East Coast, which is dense with shoppers and supermarkets alike. Instead, the approach was to primarily target neighborhood “food deserts,” which were sometimes in the literal deserts of Arizona, California, and Nevada.

These regions have been among the hardest hit during the Great Recession and the real estate collapse, and in recent years it’s been difficult for many businesses to stay open, let alone expand, in the Sun Belt. But Fresh & Easy can’t put all of the blame on the economy and bad timing. The chain went with a small format, with stores that were a cross between a Trader Joe’s and a convenience store, measuring roughly one-third the size of the typical supermarket. The idea was that Fresh & Easy would be a handy neighborhood market, attracting customers who would pop in several times a week, just like shoppers do in Europe. That’s not how most Americans shop, however, especially not in the car-heavy, buy-in-bulk West, as one expert told the BBC:

“My sense is that what they tried to do was make a European model,” says Prof Anthony Dukes, at the USC Marshall School of Business. “Europeans tend to make more frequent trips to grocery stores, maybe every day or every other day, where Americans are used to going for bigger trips less frequently.”

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Fairway, by contrast, has just 12 stores, all within about an hour of Manhattan. Staying close to home makes it easier for Fairway to understand and deliver what customers want in a supermarket. If and when the brand expands to other parts of the country, however, it’s less clear how the Fairway concept might fare.

Fresh & Easy Vs. Prepackaged & Complicated
Early on, one of the biggest consumer gripes about Fresh & Easy is that it was neither. “Fresh & Easy didn’t exactly bowl people over,” noted The Packer, a trade publication. “Emphasis on prepackaged produce, especially at first, didn’t mesh with West Coast consumer sensibilities.”

Vegetables tended to be wrapped in cellophane in bundles, to address the food safety issues Tesco executives thought were a big concern among shoppers. But that often meant shoppers couldn’t inspect the tomatoes for bruises or buy just a single onion. The focus on ready-made meals didn’t resonate with shoppers either, and it certainly didn’t help stores live up to the “fresh” name.

As for the “easy” part of the equation, Fresh & Easy relied on self-checkout, which many shoppers find quite complicated and off-putting. “Self checkout lanes not only do not save their customers time but usually take them even more time to check out than customers in standard checkout lanes,” read a statement from Big Y, a supermarket chain in the Northeast that eliminating self-checkout in late 2011. “Self-checkout lines get clogged as the customers needed to wait for store staff to assist with problems with bar codes, coupons, payment problems and other issues that invariably arise with many transactions.”

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Presumably, Fresh & Easy offered convenience in the form of dozens of small neighborhood locations, but because the selection was limited—and not particularly beloved—many felt the stores didn’t deliver one-stop shopping. And if you need to go grocery shopping after visiting a retailer that bills itself as a grocery store, that’s not convenient or easy.

Fairways, on the other hand, tend to be large (the Red Hook, Brooklyn, location is over 75,000 square feet), with enormous selections of cheese, fish, and exotic treats, and produce that’s fresh and squeezable enough to develop something of a cult following. The stores boast “strategically placed employees, wearing ‘Do you have a food question today?’ aprons,” as the New York Times put it, as well as all the staples for shoppers looking to stock up during a big weekly grocery run. “Fairway has the Bounty paper towels and Coke but also these small-batch, artisanal items that make it an adventure,” Philip Lempert told the Times.

Excitement & Discovery
Speaking of adventure, the prospect of surprise, of never knowing what will pop up around the next corner, is one of the reasons that consumers are drawn to Fairway, Whole Foods, Trader Joe’s, and, perhaps most notably, Costco, which is always changing its roster of tempting impulse buys.

Young people especially want a sense of discovery when engaging in what can be the drudgery of grocery shopping. “Millennials wake up every morning not wanting to eat the same food twice in their lifetime,” Lempert said to the Times.

In March, when the Los Angeles Times declared Fresh & Easy “a flop,” one expert said part of the reason for the brand’s failure was that it was boring, and that stores didn’t customize inventory based on what shoppers liked:

“They offered a uniform assortment in all their stores, meaning a store in upscale Scottsdale, Ariz., would have the same products as in Compton,” said Jim Prevor, an industry analyst who is editor of the food retailing website Perishable Pundit.

The Value Proposition
The goods at Fairway aren’t nearly as cheap as, say, Aldi, the small-format, rapidly growing chain that opened its first location in Manhattan last fall. Still, because Fairway’s prices are decent, and because it’s known for better quality and a much broader selection of brands than Aldi, or its sister retailer Trader Joe’s, Fairway is considered a solid value among its core metropolitan area shoppers.

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By most accounts, the prices at Fresh & Easy weren’t bad. “A lot of shoppers loved the prices,” said Lempert. “The wine selection was good too.” Even so, “the chain’s lack of vouchers and coupons alienated price-sensitive shoppers,” according to the LA Times.

The absence of checkout clerks and the minimal customer service in stores also proved to be impersonal and frustrating, even to the point that the shopping experience seemed not only unpleasant, but a bad value.

“They wanted to be the neighborhood market,” said Lempert. “But the neighborhood market has Tony behind the counter who says hello when you walk in and knows you by name. It was a matter of efficiency versus personality. Ultimately, there was no heart and soul at Fresh & Easy.”

11 comments
SusanBlather
SusanBlather

Tesco failed to make Fresh&Easy popular because the owners made huge mistakes and spent too much money on a concept that is flawed.  The new owners have taken over and are making bigger mistakes.  They eliminated all discounts, stopped taking coupons, and raised prices by almost 50% on average.  Customers have reacted negatively, but instead of listening they are eliminating negative comments and banning people from their social media pages.  They have also doubled down on a self check only format.  They have eliminated popular discount items and eliminated the enourmously popular clearance section of the store.  The cost to shop has doubled and they are losing customers in droves.  Leaked internal documents show sales have dropped about in half.  If the new owners don't start listening to customers soon they will close all the stores for good.  Over 50 stores have already closed since last summer.

ChineseLantern
ChineseLantern

I love Fresh and Easy and can't understand why it hasn't performed better!  I have been a loyal Trader Joe's shopper for years, but left when I discovered F&E.  For me, its almost the perfect grocery store.  I'm single and live alone, so it really doesn't make sense to cook an elaborate meal from scratch. At F&E, I can buy healthy meals that have most of the prep work already done and just do the actual cooking part at home.  Much better than heating up something frozen or ordering takeout.  I also like how they are preservative and additive free.  One of the things that I don't like about Trader Joe's is that they only carry TJ products; at F&E you can get both F&E as well as national brands so its more convenient and I don't have to go two places.  The prices are great also, comparable to TJ's.  I like the feel and set-up of F&E, and I really love how all the lanes are self check-out.  I don't understand why people aren't into that!  It's much faster than regular and sometimes I just don't feel like interacting with anyone.  At F&E I can get in and out.

I really, really, really hope F&E doesn't close!  It might not work for parents with large families, but I think its perfect for younger single people.

orkneylad275
orkneylad275

I use self-checkout only when I have a few items or when the lines with cashiers are long and most customers have more items than I do. If my supermarket wants me to use the self-checkout, then let it give me a 5% discount for saving on cashiers' wages.

One problem with Aldi is that you may develop a liking for a product only to find that it isn't regularly stocked. Examples: Deutsche Kueche breads: pumpernickel, sunflower seed. Another problem is that those in the stores have little if any say in what the stores stock. Example: Lifeway Kefir has been added to the dairy products carried. But Aldi do not carry plain, unflavored Kefir. Mine has blueberry and strawberry. My family drink kefir for the health benefits and don't want or need the added sugar.

There are no Trader Joe stores nearby; the closest one is 2 hours away, so we stock up on things we like when we shop there. In all the years we've shopped there we've never been disappointed with the quality of a single product. I find some of the items pricey, but am not about to drive from store to store looking for the cheapest price.

Fairway is terrific; couldn't visit New York without it. Excellent produce, fairly priced. Good deli and pre-prepared foods departments. For some items I find it a tossup between Fairway and Zabar's. Zabar's has the better fish department.

AlisonChristinaBox
AlisonChristinaBox

I have to disagree with some of the "downsides" listed for shopping at Fresh & Easy. The biggest is the "lack of coupons" - I've been getting their $5 off a $25 purchase coupons for well over a year, which are a big draw for me, as they can be doubled, tripled - if you spend $75 or $100, you're getting $15 or $20 off your total. That's huge. Prices are steep for the take-and-nuke prepared meals and non-food items, but actually cheaper for most of the store brand, regular food items. There's also a fantastic selection of coupons for these items through the Friends program, which tailors the coupons to your previous buying patterns. I regularly save another $5 just with these coupons - so now I'm down to say, $55 for $75 worth of food? They also have great sales and discounted items regularly. I find the employees at my neighborhood location very helpful and checkout is fast for me. If you have done self checkout even a couple of times before - it is easy!! And by the way, some of us with young children can really appreciate a quick in-and-out, smaller grocery with NO candy at the registers and a GREAT selection of organic and real food options at the price of regular, processed options. For these reasons I have switched almost all of my shopping to F&E and I hope they stick around for the long haul. 

schipmark
schipmark

As a resident of the Phoenix area,I was excited to see the Fresh and Easy stores open. Being disabled the smaller footprint was also appealing. I hate the self checkout system and can verify that it's very inefficient. As a practical matter the store personal are forced to stick close to the registers to aid frustrated customers. In the stores I frequent,the staff are always good natured and helpful. I am able to find 80% of my shopping needs and I realize that with limited space there isn't much that can be done about the other 20%. Tesco didn't seem to go "all in" when opening stores. They built several buildings here that never opened. Also,they didn't seem to understand the local market and seemed to make "odd" location decisions. They now have a coupon program that is directed at precisely my purchasing preferences. This is wise marketing and very welcomed. I will continue to spend most of my grocery $$ between F&E and Trader Joe's. In spite of some of the minimal inconvenience I hope they remain in our market area.

VirginiaRodriguez
VirginiaRodriguez

this is really interesting. I read the article and also the comments and I think everyone has a great point of view. I've been to fresh and easy a couple of times, but I never really done my whole shopping there. I bought asparagus their once and I can say it wasn't fresh at all. And they didn't have much of a variety.

The one thing fresh and easy does have is great deals, deals that no other grocery stores has. Their ad's are also very nice to look at because the food looks real good. 

And I also agree with the fact that many Americans like bulk buying and you cannot do this at fresh and easy. I think its because we always want to be busy and don't like making second trips. I love the fact that European's make regular trips to the grocery store because that means they have a nice meal planned and want to get it fresh to make.

I really want to support fresh and easy though, im going to go shopping here more often because it I a nice store, with a different style.

KarenManziJensen
KarenManziJensen

Moved to North Carolina and am missing my Fairway, bigtime.

jesseivery
jesseivery

I think Fresh & Easy has a great concept that was too sophisticated for the average American. Americans would rather sacrifice quality for low prices and don't mind waiting in line for an hour at Wal-Mart. My experiences have all been great at F & E. I do have to go to other stores in addition to them but its not like every one else doesn't do that already. I hope whole foods buys them so I can continue getting good quality food with out all the hassle of big stores.

NigelOswyn
NigelOswyn

I never even knew this was in America.  I've been to London many times, and love the small markets at the train stations and on the high streets.

However, since Whole Foods opened there, I would make special trips there for dinner exclusively because of its trusted name and take away selections.  I hate restaurants.  Before Whole Foods, I would eat primarily ready made sandwiches and salads from M&S (Marks & Spencer) or Sainsbury's.  America doesn't have a lot of foot traffic on the streets in the locations for Fresh & Easy, so that is probably also why it failed.  Europeans tend to bike and walk more on their streets rather than drive.  

Since Americans don't like frequent trips, this is why the refrigerators are larger here than the ones in England.  I noticed this when I went to Peter Jones and saw their kitchen appliances with smallish fridges.  They shop more frequently and store less in their cupboards.  This is also why their kitchen units are limited.  They focus more on efficiency with space constrictions due to higher housing prices.

piter
piter

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