Tesco plans loyalty card to tackle U.S. losses

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Tesco, the world’s no.3 retailer, will test a version of its successful Clubcard loyalty card in the United States as it battles to stem losses at its Fresh & Easy chain.

The British supermarket group said on Monday it would trial the card, to be called “Friends of Fresh & Easy,” in seven stores in central California, this autumn.

If successful, it could be rolled out across the chain by the end of February, the Financial Times newspaper said, quoting Fresh & Easy chief executive Tim Mason.

Fresh & Easy racked up 186 million pounds ($299 million) of losses in the year ended February, more than analysts’ expected and putting a question mark over Tesco’s goal, launched in 2007, to conquer the United States with discounter-style neighbourhood stores.

New Chief Executive, Phil Clarke, has pledged a significant reduction in losses this year and that the chain will break even towards the end of the 2012-13 financial year.
MF Global analyst Mike Dennis, a long-standing critic of Fresh & Easy, said earlier this month a loyalty card would be a high-risk strategy for a chain which has relied heavily on money-off coupons to drive sales.

“It could confuse shoppers who are meant to believe that Fresh & Easy is a already price competitive and could impact sales in the change over process from coupons to collecting loyalty points,” he said.

Espirito Santo analysts, however, said the commitment to a loyalty card suggested Tesco management were more comfortable about the underlying Fresh & Easy business.

Tesco said U.S. loyalty card holders would earn one point for every dollar spent at Fresh & Easy and would be able to exchange their points for cash-back rewards.

Tesco’s Clubcard scheme is one of the most successful in retailing, with over 30 million members in 12 countries. ($1 = 0.620 British Pounds)

Source – Reuters

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