To Our Readers

For many years now, Tesco has been UK’s leading supermarket chain; it has also enjoyed considerable success in most of its forays abroad. Given its track record, it is a matter of some surprise that it chose to enter the US, the world’s largest market for retailers, so late in the day. Tesco chose to be circumspect in its approach to the US market, being wary— with good justification—of the ferocious competition it would have to face from seasoned and successful retailing giants such as Wal-Mart.

When Tesco did enter the US in November 2007, it did so after careful preparation, with a great deal of detailed market research—including one study where its executives, without revealing their true intentions, stayed with American families, observing their lifestyles and shopping habits first-hand. Eventually, when Tesco launched its US operations, it chose to do so with small format neighborhood grocery stores under the Fresh & Easy name, rather than with its more common big box store format. Tesco’s market research had revealed that low- and middle-income urban neighborhoods were underserved by the existing US retailers, and it aimed to target customers in these locations. Tesco also figured that the different format and location of its stores would serve to differentiate its brand from its competitors.

The first Fresh & Easy store was opened in California. Subsequently, more stores were opened in California and the West Coast states. However, the US operations did not start smoothly, as the outlets were criticized for a number of reasons, including comparatively high prices, and a lack of variety in the products offered. The sales too were lackluster, and therefore, in April 2008, after 61 stores had been opened, Tesco called a temporary three-month halt to new store openings. Clearly, in spite of exhaustive preparations, the company still had more to learn about the US market. However, it was also equally clear that, given its deep pockets and retailing expertise, it would not pull out of the US in a hurry. Our Case in Focus in this issue of Case Folio, “Tesco in the United States” describes the retailer’s entry into the US, and the problems it faced in the new market.

This issue of Case Folio also contains two other case studies: “Kleenex: The Saga of a Super Brand” describes Kimberly-Clark’s campaign to rejuvenate its Kleenex brand, while “Dell’s Supply Chain Management Practices” discusses the supply chain practices adopted by the computer manufacturer to support its unique direct sales model, and the changes that had to be made to the supply chain when the competitive advantages of the direct sales model were whittled away by the strategies of the company’s competitors.

- S S George