More than five years ago, Tesco planted its flag firmly on US shores by launching the Fresh & Easy chain. Next week, Britain's largest supermarket owner is set to confirm that it is abandoning the venture, having sunk £1bn into its doomed transatlantic foray.

Wind back to November 2007 and the roots of Fresh & Easy's failure were already visible. Tesco was herding City analysts and journalists around Los Angeles to showcase its new US operation and the local chains that it hoped to vanquish.

The coach stopped at Trader Joe's, the grocery chain, where Tesco's then US chief, Tim Mason, lectured one of his rival's employees on the correct way to handle a stock trolley.

Five years later, he would quit Fresh & Easy amid severe losses and Trader Joe's would be in the running to scoop up some of its stores. Maybe Tesco should have focused on what its competitor was doing right.

Trader Joe's, owned by the German supermarket giant Aldi Nord, has about 370 stores in the US and sells an estimated $1,750 (£1,140) in merchandise per square foot. The sales per square foot achieved by Fresh & Easy during its opening months was a mere $11 to $25.

Both businesses are owned by European retail giants, so why did only one win the west?

Like Fresh & Easy's 200 US stores, Trader Joe's strives to sell wholesome food at a low cost. The key difference between the two lies in Trader Joe's focus on customer experience – the cheery staff wear Hawaiian shirts, morning shoppers get free coffee and kids get rolls of stickers. Over at Fresh & Easy, customers fend for themselves at self-service checkouts.

In 1979, Trader Joe's founder, the US entrepreneur Joe Coulombe, sold the firm to the privately owned Aldi Nord, best known for its no-frills Aldi stores in mainland Europe. The Aldi chain in the UK and US is run by a separate German company, Aldi Sud, which is heavily tipped to pick up some of Fresh & Easy's stores and a distribution centre.

Trader Joe's follows its parent group's business model of focusing on a narrow selection of own-brand products which are cheap to produce and market, resulting in high profit margins.

Each shop carry about 4,000 different products, compared with 50,000 at a typical grocery store, and they are organised into quirkily named sub-brands, such as Trader Giotto's Italian food and Trader Ming's Chinese fare. The rigorously kooky tone continues on the product packaging, where the writing on a box of own-brand tissues gently reminds the customer that "I'm there when you're sad."

Fresh & Easy also relies heavily on own-brand products. However, according to Burt P Flickinger III, managing director of the US retail consultancy Strategic Resource Group, it failed to replicate Trader Joe's buzz in its design and customer communication.

"Trader Joe's had 55 years to build up an incredibly strong following with shoppers. It could do more sales per square foot than Fresh & Easy because it had such a strong marketing programme. Fresh & Easy failed to understand how to market," he said.

Out on the streets of California, where Fresh & Easy is based, shoppers concur. Alexis Wong, 40, a radiologist from Pasadena, where there is both a Trader Joe's and a Fresh & Easy, is underwhelmed by the British chain's appearance. "Fresh & Easy has a pretty generic logo and the stores have a pretty generic look with simple ads and packaging. It felt like the products were commodities that did nothing to stand out from goods at other stores. I can't say Fresh & Easy has a certain item that I go for. Trader Joe's on the hand, has unique products, or at least that's my perception."

Perhaps the Hollywood celebrities Jessica Alba and Eva Longoria, who have been photographed with Trader Joe's bags, are drawn to the chain by its perky staff, who are referred to as "first mates" or "captains" by the retailer.

However, staff contentment is better explained by higher than average pay and benefits rather than offbeat job titles, according to Flickinger. "Due to its compensation policies, Trader Joe's has a high level of staff loyalty," he said.

Tesco tried to reduce costs by taking as much labour out of the stores as possible, resulting in scant human interaction at the checkout, he said.

When it publishes its annual results on Wednesday, Tesco is set to draw a line under those errors by announcing the end of Fresh & Easy. The postmortem of the venture continues to produce competing reasons for its failure: from poor locations, pre-packaged fruit and restrictive rents to the 2008 financial crash.

A comparison with Trader Joe's adds another cause of death – this straightforward British value-for-money outlet simply wasn't cool enough for California.