Tesco is poised to experiment with a smaller convenience store format in southern California, as it strives to stem losses at its Fresh & Easy chain.
Britain’s biggest retailer will trial a handful of stores under the “Fresh & Easy Express” name by the end of this year, as part of its plans to open 214 supermarkets on the west coast by the end of February.
The stores are expected to be about 3,000 sq ft each, around the size of a typical convenience store in the UK.
The move will enable Fresh & Easy to establish a presence in neighbourhoods unable to accommodate its standard 10,000 sq ft stores, already smaller than typical US supermarkets.
The new format could particularly help it to reach into urban Los Angeles, where suitable sites are hard to find.
Tesco already has some units as small as 7,000 sq ft in San Francisco, but the express stores mark a further departure for Fresh & Easy.
Tesco said: “We are always looking to serve more neighbourhoods and in order to open stores in more communities we are going to be trialling a handful of smaller stores called Fresh & Easy Express”.
The trial is the latest move by Tesco as it seeks to steer Fresh & Easy to break even by the end of its 2012-13 financial year.
It also demonstrates how Tesco, under new chief executive Philip Clarke, is bringing features that have worked in other parts of the group to Fresh & Easy.
Later this year it will trial a version of its successful Clubcard loyalty scheme in the US.
Tesco operates convenience stores in many of its international markets, including the UK, South Korea, China and central Europe. The US smaller stores will be owned by Tesco rather than franchised.
Tesco is also revamping Fresh & Easy stores, to make them more like typical US supermarkets.
Clive Black, analyst at Shore Capital, said the moves “underscore the fact that Fresh & Easy has needed a leg up from the rest of the group.”
Tesco’s latest assault also underlines the broader shift to smaller stores in the US, as grocers seek to move deeper into urban areas and tap into shoppers’ growing demand for convenience, against a backdrop of high fuel prices.
Walmart, the world’s biggest retailer, is also experimenting with smaller stores, although these are more akin to the size of Tesco’s standard Fresh & Easy supermarkets than the forthcoming smaller convenience stores.
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