After a money-losing grocery venture in the United States, Tesco has its eye on an entirely different business plan — selling clothing in the Middle East.Best known for the thousands of grocery stores that it operates across the United Kingdom, Tesco in 2001 launched the F&F Clothing line, which started in the United Kingdom and is now available in 11 European countries.
Tesco officials this week announced plans for an F&F franchise agreement in the Middle East — plans officials say would help the company’s goal to become “a truly global fashion brand,” according to a company release (via Advertising Age).
The clothing line is currently worth about £400 million ($619.32 million), according to the company.
F&F clothing will first arrive in the Middle East later this year in Saudi Arabia through a deal with Fawaz Abdulaziz Al Hokair & Co, a Saudia Arabia-based retail and real estate company, officials said. The franchising model will ultimately include both stand alone stores and units within department stores.
Tesco officials did not reveal how much the clothing sold through the new franchise deal will differ from what’s currently sold in European locations, except to say that the company will “work closely with Al Hokair to build a range of clothing that is ideal for the local market.”
The European line, which can be viewed online here, features trendy apparel for men, women and children at budget prices. For example, a shopper can purchase a woman’s black shift dress for £16 ($24.77), a striped silk tie for £6 ($9.29), or a child’s raincoat for £12 ($18.58).
But finding what will sell well in the Middle Eastern market will be a key to the plan’s chance of success.
Tesco officials should take a cue from their recent less-than-successful foray into the U.S. market with its Fresh & Easy grocery store chains, which first opened in the fall of 2007.
Tesco officials planned to focus their Fresh & Easy stores in so-called “food deserts,” under-served communities with few fresh grocery options, according to a Wednesday article in The Guardian. But after the initial roll-out proved less profitable than expected, the company closed more than a dozen locations. Last week, Tesco officials announced 12 more stores will be “temporarily” closed. At the same time, they are opening several dozen new locations, mostly in more-affluent areas.
The complete 180-degree strategy turn has meant that Fresh & Easy has yet to become profitable, according to the article. Tesco has spent more than £1 billion ($1.5 billion) on the U.S. grocery venture, and doesn’t expect to break even until the next financial year.