Pundit Interviews

Pundit Letters





Perishable Pundit
P.O. Box 810425
Boca Raton FL 33481

Ph: 561-994-1118
Fax: 561-994-1610


email:
info@PerishablePundit.com

a

Produce Business

Deli Business

American Food & Ag Exporter

Cheese Connoisseur



SPECIAL REPORT:
New Research On Fresh & Easy
The Spin Is Over-The-Top…
…The Data More Sobering

Upbeat Tone Belies Data Establishing That Fresh & Easy Appeals Only To A Small Niche

Jim Prevor’s Perishable Pundit, May 19, 2008

Although the report is relentlessly upbeat in tone, we find the data much less encouraging as to the prospects for Fresh & Easy.

In fact what these researchers report as proof of “broad appeal” we interpret as telling us — if the data is actually accurate — that Fresh & Easy appeals only to a very limited income cohort.

Here is what the report says about the income of shoppers:

“The average gross household income of all shoppers was quite high at $82,500 (versus $70k US average), but it ranged from $68k to $100k depending on a store’s location and matched each store’s local demographic. If there is a group that is not yet particularly shopping at F&E, it would potentially be 18-24 year olds on lower incomes, and possibly very large families on lower incomes. Otherwise we think it’s fair to say F&E has a broad appeal.”

The use of “average” gross income figures would not typically be done in America. These types of studies use a median rather than an average — or mean — figure because small numbers of very wealthy or high income people distort averages.

Imagine a store with ten customers. They consist of nine penniless welfare recipients plus Bill Gates. On average, the ten customers of that store are billionaires.

The median income would more accurately help you merchandise the store, as it tells you that the median income is welfare level.

If we are going to use average income, these numbers do not show, as the researchers argue, broad appeal. The report is written obliquely and thus is quite difficult to read with certainty. Thus we are not quite certain if the researchers are saying that the lowest household family income they could find in any of the shoppers at any of the stores was $68,000 and the highest $100,000 or if the researchers are saying that the average gross household income for each individual store ranged from $68,000 to $100,000, depending on neighborhood.

In either case it appears, however, that like Europeans of old who got on boats to come to America thinking our streets were paved with gold, so these researchers in London seem to think we are a much wealthier country than we are.

We’re not sure where they picked up the $70,000 US average household income — the researcher doesn’t believe in footnotes — but that is not important anyway. As we said, small numbers of very high income people distort that statistic so it is not a very useful one, especially for the grocery store industry where massive incomes do not correlate with massive increases in grocery store purchases.

What is relevant is that for 2006 — the latest statistics that are finalized — the U.S. Census Bureau reports this:

Real median household income in the United States climbed between 2005 and 2006, reaching $48,200, according to a report released today by the U.S. Census Bureau.

Median in this case means that half the households in the US have household incomes below $48,200.

Yet the researchers from Execution tell us “The average gross household income of all shoppers was quite high at $82,500 (versus $70k US average), but it ranged from $68k to $100k…”

So basically, the data Execution collected tells us that there is little support for the Fresh & Easy concept among two groups:

1. Households with incomes below $68,000

2. Households with income above $100,000

The Execution researchers don’t realize it but, if their data is correct, they have identified why the concept may fail: the vast majority of US households earn less than $68,000 per year. The top quintile of earners — those who can really spend big bucks — doesn’t start until $100,000 a year in household income.

Take a look at the breakdown of Household Income for 2006 as defined in the Annual Social and Economic (ASEC) Supplement from the Current Population survey, a joint effort between the Bureau of Labor Statistics and the Census Bureau:

Table HINC-06.

Income Distribution to $250,000 or More
for Households: 2006

[Source: U.S. Census Bureau, Current Population Survey, 2007 Annual Social and Economic Supplement.

Numbers in thousands.
Households as of March of the following year.

Number Mean Income
Income of Household Total
116,011
66,570
Under $2,500
2,533
295
$2,500 to $4,999
1,030
3,737
$5,000 to $7,499
2,124
6,431
$7,500 to $9,999..
3,002
8,713
$10,000 to $12,499
3,677
11,206
$12,500 to $14,999
3,203
13,668
$15,000 to $17,499
3,677
16,088
$17,500 to $19,999
3,169
18,646
$20,000 to $22,499
3,886
21,056
$22,500 to $24,999
3,005
23,690
$25,000 to $27,499
3,750
26,007
$27,500 to $29,999
2,880
28,629
$30,000 to $32,499
4,096
30,976
$32,500 to $34,999
2,627
33,643
$35,000 to $37,499
3,489
35,989
$37,500 to $39,999
2,486
38,635
$40,000 to $42,499
3,607
40,956
$42,500 to $44,999
2,270
43,620
$45,000 to $47,499
2,879
46,022
$47,500 to $49,999
2,195
48,606
$50,000 to $52,499
3,354
50,921
$52,500 to $54,999
1,920
53,655
$55,000 to $57,499
2,428
56,017
$57,500 to $59,999
1,828
58,660
$60,000 to $62,499
2,712
60,873
$62,500 to $64,999
1,645
63,678
$65,000 to $67,499
2,108
65,965
$67,500 to $69,999
1,424
68,620
$70,000 to $72,499
2,332
70,960
$72,500 to $74,999
1,399
73,664
$75,000 to $77,499
1,906
75,972
$77,500 to $79,999
1,267
78,686
$80,000 to $82,499
1,784
80,903
$82,500 to $84,999
1,223
83,606
$85,000 to $87,499
1,425
85,986
$87,500 to $89,999
1,009
88,603
$90,000 to $92,499
1,437
90,955
$92,500 to $94,999
1,008
93,653
$95,000 to $97,499
1,167
96,039
$97,500 to $99,999
898
98,652
$100,000 to $149,999
13,385
119,461
$150,000 to $199,999
4,751
169,454
$200,000 to $249,999
1,776
219,377
$250,000 and above
2,240
448,687

On the graph above we have highlighted the income cohorts that roughly corresponding to those that Execution finds to be the core for those who shop at the Fresh & Easy stores.

Note that households with incomes ranging from $67,500 to $99,999.99 account for only 15.7563% of US Households.

In other words, despite all the spin and the PR, the actual data in this Execution report is wildly negative for Fresh & Easy. It indicates it is a concept with narrow appeal. It neither appeals to the half of American households that earn below the median household income, nor does it appeal to the elite that earn in the top 20% of households.

© 2017 Perishable Pundit | Subscribe | Print | Search | Archives | Feedback | Info | Sponsorship | About Jim | Request Speaking Engagement | Contact Us