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Tesco’s Opening Gambit

BY Kevin Coupe

Editor’s Note: Kevin Coupe, founder of MorningNewsBeat.com, went to Hemet, Calif., to check out the inaugural Fresh & Easy Neighborhood Market store. Here are his on-the-scene observations.

Finally. They’re open.

I thought that if Tesco was going to go to all this trouble to travel 6,000 miles from home to open a new chain of food stores, the least I could do is travel 3,000 miles to the small city of Hemet, Calif., to see what they’re up to.

Let me answer the essential question first: If they opened a Fresh & Easy Neighborhood Market near me, would I shop there?

The answer is: I don’t know. But I certainly would give Fresh & Easy every opportunity to earn my business, mostly because the offering is just so different from those of most traditional supermarkets.

You walk in, and one of the first things to strike you is the general sparseness of the facilities. It isn’t stark or unattractive, but it is utilitarian at almost every turn, much more so than the U.K. Tesco Express or Tesco Metro stores I’ve visited.

When Fresh & Easy merchandises fresh produce, it is almost all prewrapped, except for the bananas and a few melons, in a style that is reminiscent of what Tesco has done back home. The prepared meals—whether sandwiches or ready-to-heat burritos and soups—all come in clear plastic packaging with a simple declarative label—this is a Fresh & Easy product, not available anywhere else. The packaged grocery comes in cut cases, so that replenishing stock is simple, and the low-cost image is reinforced in the same way that a membership club does it, though the sizes tend to be medium—not as small as in a c-store, and not as big as in a club.

The place is loaded with help, which probably is an opening-week gambit as opposed to how it will be staffed a few months from now, and the folks working there are engaging and helpful. There’s lots of sampling. The front end consists of nine self-checkout lanes.

The store is roughly 50% private label, with national brands sprinkled in where they will offer credibility, such as in cookies and cereal. But mark my words—if Fresh & Easy pans out and is as successful as Tesco wants it to be, you’ll see a diminishing selection of national brands.

In fact, that’s my sense of the whole enterprise. I suspect that these are just Phase 1 in a much longer-range plan. I know people who believe Tesco will have 5,000 of these things in five years; I know others who think they just won’t work. I’d guess the reality will be somewhere in the middle—they’ll work, but they are part of a broader strategy for how and where Tesco wants to engage with U.S. customers.

What else can I tell you? Well, the pre-wrapped grapes that I ate were crisp and neither too tart nor too sweet, so score one for Fresh & Easy. And the sushi was excellent—always a good indicator of whether a store is getting the freshness thing right. Fresh & Easy also is offering its own version of Two Buck Chuck—several wines going for $1.99.

One final thought: Tesco leadership should be complimented for doing something different. Will it be the right formula to attract U.S. consumers, especially in the vastly different markets where it plans to put the stores? I have no idea. But Tesco is nothing if not crafty and innovative, and I suspect that as its strategy and tactics unfold, it will prove to be interesting to consumers and challenging to its competitors.

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CompUSA may get a new look

BY CSA STAFF

ADDISON, Tx. After opening a new format store last month, CompUSA may be changing the format of its other stores, depending on customer demand and product interest.

According to reports, the elements found in the prototype store, located in Texas, will be incorporated into other CompUSA locations across the United States.

The nearly 7,700 square-ft. relocation site includes an Apple shop featuring Mac computers, iPods and Apple accessories, and a full-length LCD TV wall.

Additional expansions include extended gaming, which includes an entire wall devoted to the Nintendo Wii, PlayStation3 and Xbox 360 gaming platforms, plus a PC gaming setup to test equipment and play new titles.

While businesses can get their share of support with a specialized services section, all consumers can visit the store’s redesigned IT support area.

“This new store aligns CompUSA’s vision to better serve its three core customers, the technology enthusiast, educated professional and small and medium businesses,” said Gabriela Villalobos, the retailer’s sales and operations evp.

CompUSA announced in April that it would narrow its focus to three core customer groups rather than try to serve a mass audience.

The move was part of a comprehensive restructuring, initiated last February, that included an overhaul of senior management and the closure of half its store base as the privately held chain looked to improve sales and profitability.

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Walgreens withdraws from CVS provider plans

BY CSA STAFF

DEERFIELD, Ill. After many months of talks over low and below-market payment rates by CVS Caremark for four prescription plans, Walgreens has withdrawn as a pharmacy provider from the plans.

Patients affected include members of prescription benefit plans managed by CVS Caremark for ArcelorMittal, Johnson Controls, Progressive Casualty Insurance and Wisconsin Education Association Trust.

Most of the affected members live in Illinois, Indiana, Michigan, Ohio and Wisconsin.

Trent Taylor, president of Walgreens Health Services, the managed care division of Walgreens, released the following statement:

“This is not where we wanted negotiations to lead,” he said. “We’re sorry that our pharmacy patients and CVS Caremark’s clients are caught in the middle, and we’ll do all we can to ensure a smooth transition for our patients to another pharmacy. Meanwhile, we’ll continue to work on resolving this issue with CVS Caremark.

“Leaving a benefits plan is an extraordinary step for us, but it demonstrates how extraordinarily low our payments were from CVS Caremark. We can’t continue accepting reimbursement rates that are drastically below market, while offering patients needed special services such as 24-hour pharmacy access and drive-thru pharmacies.”

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