Fresh & Easy [Reported] to Import Loyalty Program to U.S.

Discussion
Dec 08, 2009
George Anderson

By
George Anderson

IMPORTANT Editor’s Note: As reported subsequently by Supermarket News, the Financial Times was mistaken to assume Tesco has a new loyalty program being planned for Fresh & Easy.

“The story was based on speculation about a job advertisement listed on freshandeasy.com,” according to company spokesman Roberto Munoz.

We’ve decided to keep this discussion online to preserve some of the well-informed commentary about loyalty marketing that you’ll see below, but please disregard the reporting in these following paragraphs.

Tesco’s Clubcard is widely viewed as one of the most productive
shopper loyalty programs in retailing and now it appears as though the company
intends to bring it to the U.S. in an attempt to help its Fresh & Easy
chain, according to a Financial Times report.

When originally devised
for the U.S. market, Fresh & Easy
was intended to be a no-frills, limited assortment, discounter delivering the
product quality associated with Whole Foods at Walmart-like prices. By most
accounts, Fresh & Easy has struggled with its approach and importing
the Tesco loyalty program is apparently one response to address its on-going
challenges.

One,
perhaps, significant difference between the Tesco program in the U.K. and U.S.
is that dunnhumby will not be able to work with Fresh & Easy
here. The company, which is partly owned by Kroger, works with that company
on an exclusive basis in the grocery sector in the U.S.

On the plus side, Tim
Mason, who runs Fresh & Easy, was instrumental in launching the Clubcard
program when he served as marketing director for Tesco.

Discussion Questions:
Will bringing Tesco’s Clubcard to the U.S. be a good or bad move for Fresh & Easy?
What types of practical changes will it mean for Tesco’s U.S. operations?
How big a deal will it be that dunnhumby will not be involved in the U.S. program?

Please practice The RetailWire Golden Rule when submitting your comments.

Join the Discussion!

17 Comments on "Fresh & Easy [Reported] to Import Loyalty Program to U.S."


Sort by:   newest | oldest | most voted
Peter Fader
Guest
11 years 5 months ago

The success of the Clubcard in the UK has been overstated (as indicated by Tesco’s recent slowdown), and the US market is quite different. I see no reason why it will “move the needle” for Tesco any more than similar programs have done for other grocery retailers in the US–i.e., very little.

Doron Levy
Guest
Doron Levy
11 years 5 months ago

You want to extend as much value as you can to your customer and the Clubcard is an excellent extension for Fresh & Easy. Don’t forget that most of their competitors have some sort of loyalty program so instead of applauding Tesco, we should say: “Welcome, party started 20 years ago. How long have you been on our shores?” Integrating it with the UK program only makes sense. We really hate it when US promos and offers aren’t valid in Canada.

David Livingston
Guest
11 years 5 months ago

At this point I think we will see Tesco throw a lot of things at the wall to see what sticks. It will be just one more thing for them to tweak as time goes by. Overall, I think the loyalty card program will help, but not dramatically.

Max Goldberg
Guest
11 years 5 months ago

Loyalty programs are already offered by most major grocery chains. Most frequent grocery shoppers belong to at least one, so a Fresh & Easy program will not be new. When they first opened, Fresh & Easy touted their service and products (most of which were private label). In Southern California, where there is a plethora of grocery choices, this did not work. The stores were unattractive and the meat and produce looked second rate.

Since opening, Tesco has tried a number of tactics to drive more consumer interest. Will a loyalty program make these stores more relevant to consumers? I doubt it.

Gene Hoffman
Guest
Gene Hoffman
11 years 5 months ago

Tesco will test the American waters with its imported loyalty card program and find that there, it will be a limited foundation to operate upon. Fresh & Easy will need a better mousetrap to catch and hold America’s customers.

James Tenser
Guest
11 years 5 months ago

The Clubcard program will permit Fresh & Easy to compile some valuable shopper behavior data. It doesn’t necessarily need dunnhumby to properly interpret this information. I would anticipate modest benefit from this activity, mainly in terms of merchandising refinements.

From the shoppers’ perspective, the reasons to enroll and use the cards will need to be made clear. Frequent shopper card programs are nothing new here, and most of us have been trained to flash the cards in order to obtain posted discounts.

Fresh & Easy may increase promotions of its own-label products as part of this effort.

Another limitation: Fresh & Easy is very likely capturing only a fraction of household consumption among even its loyal shoppers. The card data will have gaps that will make interpretation more challenging.

Richard J. George, Ph.D.
Guest
11 years 5 months ago

First, let’s call them what they really are, “frequency of purchase” cards. Very little loyalty is generated by cards that simply give discounts and are carried by most shoppers for the variety of food retailers that they shop.

Second, if this is to be different than most “loyalty cards” then it really needs be focused on customer lifestyles based on a a review of their shopping habits.

Third, the loyalty scheme as announced by Tesco needs to be more than a vehicle to award a shopper with a frozen turkey at selected times of the year. Instead, it needs to be based on a profile of selected customers and target markets and then deliver benefits that reflect and appeal to their lifestyle and preferences.

Joel Warady
Guest
Joel Warady
11 years 5 months ago

I have to disagree with those who feel that the Tesco loyalty program is not a competitive advantage in the UK. The work that Tesco has done in better targeting the right target market with the right offer has made them the supermarket leader in the UK, in a country where Sainsbury dominated for years.

That being said, this is not a program that will move the needle overnight for the Fresh & Easy stores. It is a long-term strategic move, and I see it as an indicator that Tesco is in the US market for the long-haul.

Paul R. Schottmiller
Guest
Paul R. Schottmiller
11 years 5 months ago

Whether this moves the needle depends on whether it offers anything compelling beyond the “loyalty” programs that the major US chains already have. The fact is that the loyalty programs in the US create little “loyalty.” Consumers get the cards so they get the lower posted prices, but most consumers have multiple cards and shop at multiple stores (of particular note is the largest grocer, Walmart, without a loyalty program).

The requirements for creating true consumer loyalty in grocery have so far exceeded the retailers’ abilities. Interesting to see if Fresh & Easy can advance the conversation or if they will be happy with the status quo.

Bill Bittner
Guest
Bill Bittner
11 years 5 months ago

I think the loyalty card is becoming more and more important to retailers as the world becomes “over stored” and the quality of sales begin to matter more than their quantity. The retailer who can use its loyalty card to create a customer profile that enables it to target promotions and offer specific services that a particular customer wants is going to win.

If a customer only wants price, they can shop anywhere. But if continuity programs and unique services make them feel they have an investment in a retailer, then the loyalty card becomes a true enticement.

Joel Rubinson
Guest
11 years 5 months ago

I’m struggling with a disconnect. Loyalty programs for grocery are dependent on that store satisfying most or all of a shopper’s requirements. Otherwise, the data reveal a fraction of what that shopper’s needs are. It seemed to me that the Fresh & Easy concept was always a specialized grocery idea, more as a port in the storm than your regular safe harbor (so to speak).

As a promotional mechanism, it might provide some lift but as a learning tool, it will be very limited relative to Tesco in the UK.

Richard Dodd
Guest
Richard Dodd
11 years 5 months ago

Tesco’s loyalty scheme has been instrumental in the success of Tesco in the UK. The lifestyle information that they derive from the basket level data is fundamental to the operation of Tesco, as it is in the other leading user of loyalty data in the US, Best Buy. The insight that Tesco is able to gain is what truly drives basket size and frequency of shopping, not the “reward” to the customers. Furthermore, as a leading cross-channel retailer in the UK, the ability to identify shoppers is key to providing a seamless shopping experience.

The above observations are based on 15 years spent working for Tesco in the UK and internationally.

Ben Sprecher
Guest
Ben Sprecher
11 years 5 months ago
I think some of the criticism of loyalty programs here is unfounded. Just because there has been widespread adoption of the programs, it doesn’t mean the programs are useless; in fact, frequent shopper programs have been widely adopted *because* they are worthwhile. Over the years, the pioneering and innovative work done by Tesco/dunnhumby created huge value, dramatically improved Tesco’s business, and vaulted them to the top of the U.K. grocery market. And in the U.S., Kroger’s lock on dunnhumby has contributed to same-store sales growth that, frankly, blows away the industry. Where does that benefit come from? In early days, merely gathering the data, analyzing shopping patterns, segmenting shoppers by lifestyle, and focusing marketing around the shoppers who hold the most potential was enough to deliver Tesco and Kroger the big wins. But today, that level of shopper insight is becoming par for the course. So, if that’s all you do with your data, then I agree, having a loyalty program is at best keeping you even with your competition. Of course, without a way… Read more »
Peter Fader
Guest
11 years 5 months ago

While I admire the work of dunnhumby and always recommend “Scoring Points” as required reading for anyone thinking about how best to utilize a loyalty program, I also want to call attention to a relatively obscure paper by East and Hogg (“Anatomy of a Conquest,” Journal of Brand Management, 1997) which shows that much of Tesco’s amazing growth in the 1990’s was due to its dramatic physical expansion rather than just the Clubcard, per se. I have added it to my required reading list, to help put the Clubcard program into a more realistic perspective. (Kudos to Byron Sharp of the Ehrenberg-Bass Institute for pointing this paper out to me.)

So I agree that a loyalty program, when properly executed, can move the needle a little bit. But the successes that Tesco enjoyed in the UK (and the wonderful stories behind them) won’t translate nearly as well to the US market.

Herb Sorensen
Guest
11 years 5 months ago

I think of loyalty cards as the harbinger of integrating online/offline shopping. With PDAs, iPhones, etc., moving into the stores (they are already there,) any recognition of who is in the store (shopper identity) is a clue to opening an automated conversation with them, a la Amazon. Obviously, properly or improperly managing all this stuff will play a huge role in defining the winners in the next decade.

Not being able to integrate a shopper’s identity DURING THE IN-STORE SHOPPING experience, with their prior experience (“loyalty” card) and effective two-way communication while they are in the store (“PDA”), will guarantee a retailer a place in the back of the pack–if they are still in the game at all.

Michele Kalloo
Guest
Michele Kalloo
11 years 4 months ago

A loyalty card in and of itself does not guarantee any degree of success. True success lies in what data will be collected and how it will be used to further the goals of this retail chain.

Additionally, the success of any loyalty program can not be divorced from the absence or presence of other factors such as product variety, merchandising, customer service, store layout and location, etc.

Assuming that all the other factors are in place and working to the benefit of this retailer, I believe that a loyalty program can only serve to enhance their market position through the use of insights gained from segmenting their shoppers and providing incentives for modified shopper behaviour.

Bill Hanifin
Guest
11 years 4 months ago

The only aspect of the announcement (now shown to be premature or misinterpreted) was the mixing of a low price leading brand with a rewards program. To date, the category price leaders such as Walmart tend to make their “everyday low prices” their de-facto loyalty programs.

This is more about choice and brand message than it is whether loyalty works in a lower margin environment. The value of data is always high and, when intelligently put to use, can generate tremendous ROI.

Did anyone consider that this might have been a leak to the press to have a read on the market opinion?

wpDiscuz

Take Our Instant Poll

What effect will importing the Clubcard program have on Fresh & Easy’s business?

View Results

Loading ... Loading ...