Tesco, one of the largest retailers in the world, failed to expand its operations into the United States. While the reasons for Tesco's failure are complex, we can attribute it to three key factors: a failure to understand the American consumer, entry into the market at the wrong time, and many strategic mistakes.
Learn more by watching the video and reading the blog post below:
Failure to understand the American consumer
Tesco failed to understand the American consumer. The American retail market is highly competitive, and consumers have a wide range of options available to them. Tesco's Fresh & Easy stores, which were intended to be convenient, one-stop-shop stores, were not what Americans were looking for. The stores were small and offered a limited range of products, which did not appeal to American consumers who were used to larger stores with more extensive product offerings.
Tesco assumed that its British model would be successful in the US, but this was not the
case. American consumers have different shopping habits and preferences than British consumers.
American consumers tend to shop for groceries less frequently than British consumers. This is because American households are larger, and they tend to have more cars. As a result, American consumers can buy more groceries at a time, and they don't need to shop as often.
American consumers also tend to spend more money per visit than British consumers. Due to them having higher incomes, and they are more likely to buy prepared foods and other convenience items.
American also value service as part of the shopping experience. They expect to be greeted by friendly employees, and they expect to be able to get help quickly if they need it. Tesco's stores in the US were not always staffed with enough employees, and they did not always have the products that American consumers were looking for.
Entry into the market at the wrong time
Tesco entered the market at the wrong time. The global financial crisis of 2008 hit the US market hard, and many consumers were cutting back on spending, including on groceries. This made it difficult for Tesco to gain a foothold in the market, as consumers were not interested in trying out new stores or brands. Tesco's expansion was hindered by the difficult economic climate, which made it difficult to establish a successful presence in the US.
Strategic mistakes
Tesco made several strategic mistakes that contributed to its failure in the US. Tesco invested heavily in the expansion, spending over $1.5 billion to establish stores and a supply chain. However, the company made the mistake of not conducting sufficient market research or adjusting its business model to suit the US market. This led to issues with supply chain management and pricing, with Tesco initially setting prices too high for price-sensitive American consumers.
In addition, Tesco's expansion strategy was flawed, with the company attempting to open too many stores too quickly. This strategy led to issues with inventory management, as Tesco was unable to sell enough products to meet its high inventory levels. The company also struggled to maintain consistency across its stores, with some locations performing better than others.
Tesco's experience serves as a reminder of the importance of conducting thorough market research, adapting business models to suit local markets, and carefully managing supply chains and inventory levels. While Tesco may have failed in the US, the company remains a successful global retailer, demonstrating that even the most successful companies can learn from their failures and adapt their strategies accordingly