It is an archetypal sunny Monday morning in Los Angeles and Tim Mason is standing outside the Eagle Rock Fresh & Easy store in his “lucky” green-striped shirt, which he fishes out of the wardrobe every time he cuts the ribbon on a new neighbourhood shop.
Today there is not a store opening; there has not been one of those for the past three months after Mr Mason, chief executive of Tesco US, pressed the pause button on the 200-store roll-out to “smooth out any wrinkles”.
But it is clearly a big enough moment for the special shirt to come out – it is also the first time that Mr Mason has spoken publicly about Tesco’s US ambitions since he officially opened this very same store seven months ago.
In spite of his attempts at keeping a low profile on the Fresh & Easy project, it has drawn critics far and wide – from bloggers to some industry analysts – who say the model will not work.
They argue that the stores have too few branded goods for US shoppers, the look is too utilitarian, and the wrapped fruit and vegetables are “unappealing”, while the self-service check-outs are unpopular. The three-month suspension in store openings, meanwhile, was seen a sign that the wheels were coming off Fresh & Easy before it had even got going.
“I was surprised everyone went mental,” says Mr Mason, reflecting on the reaction to the pause in openings.
“It just seemed at the time the most sensible use of resource. This is a tiny business and there is limited resource. So you have a choice, you can use that [resource to run the business] and open stores as well or you can use that resource to work out how to open stores better, but you can’t do both.”
The tweaks to the model are evident as soon as you walk towards the store. It is all about low prices. At the entrance, there are palettes stacked with bags of charcoal for $4.99 (£2.56) and 24 packs of Coca-Cola for $5.99.
The first thing customers see as they enter the doors is a four-feet high mountain of San Pellegrino water for 99 cents a bottle and a new “extra low prices” unit stacked with discount offers on fresh meat and prepared meals.
“When we first started we didn’t have any high-low promotions at all,” explains Mr Mason. “What we discovered, because we were the new kid on the block, was that people didn’t get the price image,” he says, grabbing a packet of sirloin steak that has been reduced from $5.99 to $2.99 a pound.
He has “turned the volume up on price” by introducing 30 promotional lines in stores. The price cuts on these products run in fortnightly blocks, with promotional leaflets dropped through neighbourhood
letterboxes in an effort to attract locals.
“It has dramatically improved the price image,” says Mr Mason, who says that his stores are still 10-25 per cent cheaper than rivals such as Trader Joe’s, owned by the family trust of one of the German billionaire brothers behind Aldi, and the Safeway-owned Vons stores. He is sure increased footfall will follow. “We probably won’t do it forever. We track [our price image] every week by exit surveys, and this has improved it by about 20 points.”
Perhaps as a sign that sales were not quite what it wanted – Mr Mason will not comment on turnover levels – Tesco has also being more aggressive in marketing and couponing.
“[We were looking at] how you make [stores] launch better, how you get them going better,” says Mr Mason. That meant extending its couponing to all households within two miles of each store.
“It was just question of trying to find the point at which it triggers and we know, from the UK, if you are trying to build and shape discounts, it is what you need to do,” says Mr Mason as he stops in the wine aisle.
The operating model needed attention. Wastage was too high, although again he will not talk numbers.
“The second stream of work is how you align the amount of stock you need with the sales you are going to get. The problem is because you err on the side of the customer you have a lot of stock.
“You need to work on the [product] range, you need a good ordering system. Trying to have the range and variety at the sort of level of turnover that American stores do is difficult. British stores take three or four times the amount of turnover that American ones take.”
There have been another 23 new ready meals put into the stores, from classic meatloaf to shepherd’s pie. Mr Mason says that Fresh & Easy has about 120 different ready meals now, with another 60 to be made in the coming months.
“We needed to hit a period of improving the operating model and letting everything bed in a bit, so when we come back to opening four or six stores a week we are a more robust business,” he says. “There are plenty of people who don’t have any great desire to see us successful, you know. They will say stuff that is not [true], but you have to put up with it and get on with it.”
On July 2 that is exactly what Mr Mason will be doing, as he puts on his lucky green shirt and cuts the ribbon on shop number 62 in Manhattan Beach, next door to the head office.
“You need a store with real customers in it that you can drop into,” says Mr Mason. Is he worried about being next door to a Trader Joe’s? “It is the closest we have ever been to one,” he says, smiling, “but we will do just fine”.