Tesco unveils new discount chain Jack’s
Sep 20th 2018, 14:08
British supermarket group Tesco has thrown down the gauntlet to German discounters Aldi and Lidl by launching what it says will be the cheapest store in town – Jack’s.
The new store is set to compete directly with Aldi and Lidl, with plans to open 10 to 15 stores during 2019.
Jack’s is named after Jack Cohen, who in 1919 founded the business that became Tesco. It is a significant move by Lewis, who has rebuilt Tesco after a 2014 accounting scandal capped a dramatic downturn in trading.
In addition to Jack’s products, the stores will stock some familiar grocery brands and a range of general merchandise. "The intention is for us to be cheapest in town," he said at the Chatteris store, which was built as a Tesco supermarket but was mothballed in 2015 when the group was in crisis.
It said that eight out of 10 products on the shelves will come from Britain and said it is investing £20m to £30m in the first openings. The retailer said Jack’s stores will be a mixture of entirely new sites, sites adjacent to existing stores and a small number of converted stores.
A second mothballed store will become a Jack’s, it said, while five existing Tesco shops will be changed to the format.
Tesco is Britain’s biggest chain with a 27.4% share, according to the latest industry data, although it could be overtaken by Sainsbury’s proposed £7.3bn takeover of Asda.
The tie-up between Tesco’s two nearest competitors, which regulators said would be scrutinised in depth, is also driven by the rise of the discounters.
Britain’s "big four" grocers are trying to adapt to changing habits, including the declining popularity of big weekly shops and the growth of online shopping. They have lowered prices and improved service, but analysts say that with Aldi and Lidl growing at 10% a year it makes sense for Tesco to try to capture some of that growth.
However, some are concerned Tesco’s new format could simply cannibalise sales at its existing stores.
Jack’s is not the first attempt by Britain’s mainstream grocers to crack the discounter market. Sainsbury’s joined up with Denmark’s Dansk Supermarked in 2014 to bring the Netto discount brand back to Britain but closed its 16 stores two years later, blaming the difficulty and cost of growing at pace and scale.
Tesco tried to go down the discount route in the 1980s, with its Victor Value brand. It ditched the concept. Asda has also experimented.
"It won’t be easy to crack the discount market though, even for a brand of Tesco’s size," said Gordons law firm partner and head of retail Andy Brian.
"Tesco will have to find a way to attract customers from the likes of Aldi, Lidl and Iceland, rather than convert existing Tesco customers into discount shoppers through brand association," he said.
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