Tesco has its eyes on America

Tue, 14 Feb 2006
 
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Tesco the supermarket giant is looking to make its presence felt in America. They are aiming to open their first store on the West Coast next year.

This confirms speculation about Tesco’s plan to become a retail superpower, now that they have cornered the market in the UK.

For every £3 spent on food in large stores, £1 of that goes to Tesco. Tesco also has branches in 12 other countries in Europe and Asia.

However, the entry into the US market will be the toughest challenge faced by Tesco. The US grocery sector is worth £343 billion a year, but there are already a number of giants in the supermarket world namely Wal-Mart, the worlds biggest retailer.

The past has seen a number of British companies, Sainsbury’s and Marks &Spencer, try to break the US market will little success.

However Tesco is looking to avoid direct competition with the other retailers already established by not targeting the convenience sector.

No details were given but it was confirmed by bosses that the setup of the new stores will stay the same as the smaller Tesco Express chain in the UK.

According to Tesco’s forecast the US stores will break even by the end of its second year.

In the list of the world’s biggest retailer, Tesco ranks a comfortable third after Wal-Mart and Carrefour in France.

Sir Terry Leahy, chief executive said, "This is a tremendously exciting move for Tesco which will add a new leg to our international expansion. The US is the biggest economy in the world, with strong forecast growth and a sophisticated retail market.

"It is a market we have researched extensively for many years and over the last year we have committed serious resources to developing a format we believe will be really popular with American consumers."

In charge of the US operation is Tim Mason, who is currently the director of marketing and property.

Analysts cannot agree if Tesco has the golden touch for it to be successful in America.

Sanjay Vidyarthi, of brokers Teather and Greenwood said, "It’s clearly high-risk and a bit surprising. There’s a risk in terms of the significant cash involved."

However, Neil Saunders, consulting director at Verdict Research, said "I think there is a gap that they can fill. Tesco is a very good shopkeeper. They operate nicely laid-out, clean store with an extremely good range of products to suit all tastes."

They are not only market leaders in the UK Tesco have also become market leaders in Poland, Slovakia, Hungary, Ireland and Thailand.

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