CSD Cover Story: Tesco Prepares for its U.S. Invasion
By George Anderson
Through special arrangement with Convenience Store Decisions
magazine, we present these opportunities to discuss the subjects of CSD’s monthly cover stories.
Richard Hyman, a market analyst and chairman of Verdict Research in London, doesn’t hold back when describing what American retailers and consumers can expect when the British
chain launches its chain of convenience stores on the West Coast in 2007.
“Tesco is not only by some distance the best retailer in the UK, but I don’t think there is an operator in the world that is better at retailing,” he told Convenience Store Decisions. “I won’t say it is better than Wal-Mart but it is probably the best competitor Wal-Mart has.”
And, unlike some of the criticism aimed at Wal-Mart for a singular approach to different markets, Mr. Hyman pointed out that Tesco has not attempted to take its way of doing
business in the U.K. and tried to export it to international markets.
What the retailer has done, said Mr. Hyman, is bring “a different league of professionalism and competition” to the convenience store business in the U.K. “They’ve made the sector more dynamic,” he said.
According to Deutsche Bank, Tesco’s roughly 900 convenience stores generate $2.96 billion in annual sales in the U.K.
The company plans to rollout an additional 100 Tesco Express stores annually with roughly 15 to 20 percent selling gas under the Esso brand.
Opinions of some in the U.K. suggest U.S. convenience stores, especially smaller independents, are in for a bumpy ride when Tesco comes ashore.
Shane Brennan, spokesman for the Association of Convenience Stores, said store closures went up significantly in 2004 and 2005 in the U.K. “We put it down to Tesco’s and Sainsbury’s incursion into the convenience market,” he said.
Tesco has succeeded, in part, because it has leveraged its buying power to offer consumers a better value for their convenience store pound.
As Mr. Hyman observed, “Do they drive a hard bargain? Yes. Do they negotiate hard? Yes. Are they single-mindedly driven? Yes. Do they break most of the rules? I don’t think they do. Is it a really tough competitor that is pinching your market share all the time? Yes.”
And, it’s coming to the U.S.
Moderator’s Comment: What impact will Tesco have on the convenience store sector when it comes to the U.S.? By its own admission, Wal-Mart’s Asda unit
failed to take advantage of the convenience store opportunity in the U.K. and lost market share as a result. Will Wal-Mart respond to Tesco in the U.S. by opening its own chain
of convenience stores? – George Anderson – Moderator