Back in March 2007 I wrote a blog post entitled “Urban Grocery Store Gap” about the entrance of Fresh & Easy into urban neighborhoods and my concerns that this would eclipse the opportunity for local entrepreneurs to start grocery stores to meet local food needs and, thereby, capture local spending power for local reinvestment. When I wrote this article, I and many others were nervous that this company, which is a subsidiary of the UK-based Tesco (the third largest retailer in the world) would have extreme advantages over small and local competitors and would undermine our progress in engendering locally-owned food retail ventures.

I have to confess that I have since shifted my thinking about Fresh & Easy quite dramatically from the time when I wrote that post. As we have gotten to better understand People’s Grocery’s own business model and positioning (as well as current allegations being made that the majority of Fresh & Easy’s stores in Los Angeles, Arizona and Nevada are falling short of sales goals by as much as 70%) I have gained a confidence that we can actually compete with Fresh & Easy very well. In fact, I now welcome the opportunity for People’s Grocery to compete with Fresh & Easy as a way of contrasting the economic and social impact of multi-national corporations, and the global economy upon which they thrive, to the impact of locally-owned and operated businesses on local economies and communities.

The key breakthrough in my thinking about Fresh & Easy came from a number of visits I made to food stores in other regions that are strongly competing with bigger players like Whole Foods and Kroger. These mission-driven companies have built their strength and positioning on unique competitive advantages that set them apart from the large corporations — advantages that those large corporations simply can not create themselves.

So while Fresh & Easy will certainly have competitive advantages that People’s Grocery can not replicate (industry knowledge, scale, global supply chains, technologies, political influence, capital), People’s Grocery also has a set of competitive advantages that Fresh & Easy can not replicate either (community relations, values, local knowledge and experience, brand and story, customer and brand loyalty, local supply chains, cultural positioning). The way we will compete with Fresh & Easy is to differentiate our business based on the unique value, experience and relationships that we offer to our community, which are qualities that Fresh & Easy is unsuccessfully trying to create.

Another reason that I now see Fresh & Easy’s entrance into our market area as a having a potential upside for People’s Grocery is that sometimes a larger corporate player can actually grow the overall market to provide more business opportunity for smaller businesses in the same industry. Starbucks is a good example of this. While on the one hand Starbucks has most certainly hurt local coffee shops, it has also grown the gourmet coffee market dramatically, which has been a boon for other small coffee shops.

Whole Foods is another example. While Whole Foods is often criticized for destroying independent natural food stores, the company has also been instrumental in the dramatic growth in the overall organic food industry, which has benefited those independent stores that have survived. San Francisco-based Rainbow Grocery Cooperative’s extraordinary growth over the last two decades, averaging about 15% a year, has been a great example of this.

Fresh & Easy may in fact engender a similar opportunity for smaller food retailers. Fresh & Easy is pursuing a strategy of opening smaller format stores of 10,000-15,000 square feet. This is spurring competitors like Whole Foods and Walmart to begin designing their own small format stores. People’s Grocery too will benefit from the emergence and acceptance of small format stores as this is exactly the business model that we have been planning for.

I guess the lesson I’ve learned is that there’s always an upside to everything. It’s also a lesson that we small players have our own strength to stand on and value to offer in a world of giant corporations.

This entry was posted on Tuesday, April 22nd, 2008 at 4:18 pm and is filed under People's Grocery. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.