“Having made considerable efforts in Japan, we have concluded we cannot build a sufficiently scaleable business. We have decided to sell our operations there and focus on our larger businesses in the region.”-Philip Clarke, TESCO

After eight years and 250 million pounds (U.S.$404.9 million), British retailer TESCO is quitting Japan.

The Japanese retail market proved to be too tough o’nut to crack.  TESCO has been successful almost everywhere else, especially other Asian countries.

Retail analysts say Japan’s retail culture is radically different than the U.S. or Europe: “The retail market is fragmented and there are many strong regional players, often family-owned. Convenience stores dominate, particularly in the city centers, and a culture of ‘immediacy’ supports large numbers of vending machines.”-Gavin Rothwell, retail analysts IGD

Another factor against foreign companies doing business in Japan is extremely high operating costs, and extremely demanding consumers.

However, TESCO is also losing money, big time, through its U.S. venture, Fresh & Easy.  The U.S. start up is based in Los Angeles, California.

TESCO’s Fresh & Easy operation has 176 stores in California, Nevada and Arizona.  Last year they lost $301 million, far more than what TESCO lost in Japan.

They’re spending even more money to remodel their Fresh & Easy stores, but if sales don’t pick up within the next two years, TESCO will pull out of the United States as well.