Blog: Katy AskewTesco scrambling for growth in developed markets

Katy Askew | 15 April 2014

I got an early message this morning (15 April) from our sister site, www.just-style.com. "Tesco are relaunching in the US," it read.

Whaaaa?!?!

"Don't get excited, not grocery - clothes," it continued.

As just-style reports, Tesco plans to launch F&F stores in the northeast of the country, with the first location to open in Boston. This will be followed by four stores in New York and stores in Philadelphia and Newport, Virginia.

Call me a sceptic, but I am sceptical.

Having failed to turn a profit in the highly competitive US grocery market - just months after the group had to retreat with its tail between its legs - what makes the company think it will have more luck with its clothing offering?

In the UK, F&F sales exceeded GBP1bn (US$1.5bn) last year and LFL growth was 9%. But there isn't all that much that differentiates F&F - aside from the fact that you can pick something up while you get your groceries. Does the business stand out in terms of quality, design or even value? In a word, no.

Transplanting this to the US - a highly saturated, extremely competitive market with mature players that already have strong brand recognition - doesn't sound like a recipe for success. In fact, it sound like good money after bad. 

The US has been an elephant's graveyard for UK retailers that have been lured by the fact that it is the world's largest consumer market with affluent and big-spending shoppers. For instance, M&S - that bastion of UK apparel retail - had to retreat from the US with its tail between its legs some years ago.

There have been some successes. Top Shop, for instance, operates four stores in New York, Chicago, Los Vegas and LA. The brand is also available through Nordstrom's. But then, Top Shop has something that F&F lacks: a strong identity, Kate Moss, attitude that appeals to youthful types.

Another Tesco announcement that crossed the just-food news desk raised some eyebrows last week. The retailer is reportedly looking at rolling out a food-to-go concept in London.

As our editor, Dean Best, argues this move also raises some big questions. It would see Tesco entering a saturated and highly competitive market where it will come up against established and strong competitors.

These initiatives combined suggest one thing. Tesco is clutching at straws to eke out some - any - growth in developed markets.

Sectors: Retailers

Companies: Tesco

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