Tesco: Why the supermarket is going discount with Jack’s
Tesco is expected to reveal a new brand next week at a store in Cambridgeshire that was mothballed three years ago.
Some “exciting news” has been promised by the UK’s biggest supermarket chain next Wednesday, at a media event in Chatteris.
The outlet is expected to be named Jack’s, the first of a new chain of discount stores aimed at countering the rise of Lidl and Aldi.
The two German chains now have just over 13% of the UK grocery market.
That is less than half the share claimed by Tesco, but it continues to be outpaced by double-digit growth at both Aldi and Lidl.
Chatteris may have been picked as the place for the first Jack’s as it has stores from both German discounters, as well as an empty Tesco store waiting to be brought back to life.
Half the building is now a Poundstretcher store, leaving the remaining 26,500 sq ft ready for Tesco’s second foray into the discount darkness after a failed attempt in the 1980s with its Victor Value brand.
Creating a new brand is a very bold move and not without its risks, says Natalie Berg of NBK Retail: “It’s no easy feat to establish in a crowded and cut-throat market, but it’s now so competitive that retailers are being forced to think outside the box.
“The only way to compete with the discounters is by becoming one.”
Worse service?
Setting up Jack’s – said to be named after Jack Cohen, who founded a grocer in 1919 that later became Tesco – is also an admission that the discounters are now credible competitors, Ms Berg says.
Aldi and Lidl have also shown consumers that they do not have to sacrifice quality in their search for low prices, she adds – and are willing to put up with less product choice and worse service.
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It remains unclear how many Jack’s stores Tesco plans to open. Clive Black at Shore Capital says the company may want to rebrand between 50 and 100 of its “problem” Metro stores, which are smaller than out-of-town supermarkets but larger than its Express convenience chain.
“Quite where Jack’s end up though, across Tesco’s network, remains to be seen; it would be a lot of effort for 100 small stores,” he notes.
“Jack’s, if we are correct, also represents Tesco firmly moving on, coming out of ‘fix’ mode and being more creative, innovative and… on the front foot.”
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