Why Tesco failed in the U.S.

If you have ever been to the United Kingdom, you must be familiar with the staple retailer store, Tesco. It is the biggest retailer in the UK and has a strong presence in international markets. It has more than 6,500 stores worldwide including Ireland, Hungary and Thailand. However, one country where Tesco has managed to fall off the radar is the United States.

Tesco entered the U.S. market in November 2007 with almost a $500 Million investment. They opened the first retail store in Los Angeles, California. Soon after that, they started opening more branches across the state of California and eventually expanded into Arizona and Nevada. They went under the name “Fresh & Easy,” which was supposed to give the US consumers an idea of what to expect from the new retailer, fresh food at a reasonable price.

Before trying to dip its toes into the U.S. market, the company spent two years conducting on-ground research. They also spent up to $1 Billion researching the U.S. market. They even adjusted the recipes for the ready to eat meals to fit within the American lifestyle and taste preference. However, Tesco failed in applying the results of their research which resulted in them being disconnected from their target market.

Their choice of location is one of the biggest mistakes they have done. From the company’s experience in the U.K., their small grocery stores which were located near train stations and underground subway hubs were the most profitable. However, in California and Nevada, people rarely use trains or subways. Thus, they lost a huge chunk of their business.

In addition, their strategy is to open stores that are smaller in size than a regular supermarket and place it within walking distance to any residential area or business area. However, most people who live in the West Coast do not walk that often. They usually drive to get their groceries and food which reduces the need for mini markets.

It seems that it would have been better for Tesco to open in metropolitan areas and large cities rather than branching into California, Nevada, and Arizona. Their model and strategy could intertwine better with the lifestyle of a New Yorker or someone who’s from Chicago or Washington D.C as. They are very similar to the U.K. especially London. Therefore, Tesco could have begun their U.S. expansion starting from the East Coast. Nevertheless, Tesco could’ve been successful if it were to learn from its mistakes. They were not doing well in the first branches they opened, yet they kept on expanding and opening other locations without modifying their strategy or analyzing why the first stores were not successful.

4 replies on “Why Tesco failed in the U.S.”

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