Paula Ilardo, who works for the local government in Goodyear, Arizona, does most of her grocery shopping at the local Safeway.
The traditional supermarket has recently been remodelled by the retailer to give it a more upmarket feel. But she has also been to the new Wal-Mart Neighborhood Market, a 40,000 sq ft store that opened this month just opposite the Safeway.
And she also drops in regularly to Fry’s, part of a chain run by Kroger, the largest US grocery group. “I run into the Fry’s on the way home because it’s just across the street from my office,” she says.
Paul Schickler, meanwhile, in Los Angeles’ Manhattan Beach suburb, has plenty of choices for groceries for his family of three. He lives within a mile of Ralph’s, a traditional supermarket also owned by Kroger.
“Someone is always running over there for something every two or three days,” he says.
He also lives two miles from a Costco, the discount warehouse club that sells bulk groceries, and is close to two smaller high-end stores – Trader Joe’s, a gourmet store where he says they go for “the quirky stuff” – and Bristol Farms, a local natural and organic chain.
The two shopping worlds reflect the scale of the challenge facing Tesco in Los Angeles and Phoenix as it searches for what it believes is another niche in US shopping habits with its planned “Fresh & Easy” concept. These will be a range of 15,000 sq ft stores that target the time-starved shopper the retailer serves in Europe with its smaller Tesco Express range – normally about a fifth of the size.
The markets in the two US regions may both be competitive, but they have different dynamics.
LA and southern California is already a mature and highly competitive grocery market that has been shaken up by Wal-Mart, which has struggled to win planning permission for 210,000 sq ft Supercenters against political opposition.
About 370 miles to the east, on the other side of the Rocky Mountains, Phoenix, Arizona, represents a different sort of challenge. There, the leading supermarket operators are involved in the modern equivalent of a gold rush – seeking to stake out territory in one of the most rapidly expanding urban areas in the US.
The Valley of the Sun is a contiguous sprawl linking Goodyear with Phoenix, Scottsdale, and some 20 other Arizona communities, and is filling up with 150,000 new residents a year, doubling its population since 1990 to nearly 4m.
In the city of Goodyear alone, the number of residents is growing at 18 per cent a year. “The supermarkets are trying to keep up,” says Ms Ilardo, who is the city’s information officer.
One of the city’s most prestigious new master-planned developments is Estrella Mountain Ranch, which offers residents golf courses, a lake and tennis courts but is still eight miles from the nearest grocer.
“They would be happy if one of the supermarkets opened up near them,” she says.
The local grocery business remains dominated by Fry’s, followed by Basha’s, a privately owned regional chain that also operates Food City, which is a range of stores aimed at the area’s rapidly growing Hispanic population.
Phoenix has already attracted Wal-Mart. The retailer opened its first Supercenter in the area about four years ago, and it now has 10 stores. It has also chosen Phoenix as one of the sites for developing its new Neighborhood Market store concept, with two others in addition to the new Goodyear store. The Target chain, Wal-Mart’s rival discounter, has also opened two of its SuperTarget Supercenters in the area.
Wal-Mart sees the 40,000 sq ft grocery market as a “convenience” alternative to the vast 200,000 sq ft Supercenter. This highlights the niche that Tesco is seeking to fill with its own smaller-scale stores.
At Goodyear, Ms Ilardo’s regular trips to Fry’s are one sign of how the conventional 40,000 sq ft US market – with its vast range of more than 30,000 products – is vulnerable to competition from the more focused alternative that Tesco is working on. Tesco could have the ability to sell a more limited range of more profitable products, including prepared meals.
The affluent and organic-conscious middle class of the Phoenix metropolitan area – whose population some developers say could reach 8m by 2020, or larger than London – has its needs also catered for by nine Trader Joe’s, two Whole Foods Markets and four Wild Oats Markets.
There appears to be plenty of demand to keep up. “The city is growing by at least 100,000 people a year,” says Bob Pearlstein, of CB Richard Ellis.
Additional reporting by Elizabeth Rigby