Tesco has revealed its new discount format Jack’s, which aims to take on discount retailers like Aldi and Lidl by promising price matching against local competition.
The group plans to open 10 to 15 Jack’s stores over the next six months, with Chatteris, Cambridgeshire and Immingham, Lincolnshire stores officially opening on 20 September. Five of the new locations are expected to be refurbished Tesco stores.
Tesco’s chief executive Dave Lewis unveiled the first of Jack’s stores in Chatteris, Cambridgeshire. The store has been empty since 2014 when it was expected to open as a Tesco’s superstore but the declining grocery market, as well as dive in profits and an accounting scandal, forced the retailer to reconsider.
The new chain is named after Jack Cohen, who founded Tesco in 1919, earning the nickname ‘Slasher Jack’ for his ‘pile-it-high, sell-it-cheap’ approach to retailing.
Tesco Group chief executive Dave Lewis said: “Jack Cohen championed value for customers and changed the face of British shopping. He’s an inspiration for all of us and that same spirit still drives Tesco now.
“It’s fitting that today, we mark the beginning of Tesco’s celebration of 100 Years of Great Value by launching a new brand, and stores bearing his name: Jack’s.
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GlobalData’s UK retail research director Patrick O’Brien said: “If imitation is the sincerest form of flattery, then Tesco’s new Jack’s venture must leave Aldi and Lidl feeling idolised. Less choice, cheaper own-label goods in a convenient, shoppable supermarket format, Jack’s is the first time Tesco has made a serious attempt to limit the impact of the discounters. Jack’s focus on British products gives it a point of differentiation, as does the consolidating of its own-label products into the Jack’s brand.
“Sainsbury’s tried something similar in 2014 with its Netto joint venture, only to close two years later having only opened 16 stores. The secrecy and fanfare surrounding Jack’s launch points to a much more ambitious attack but its plans to open 10-15 stores next year are surprisingly tame.
“As Tesco targets a return to a 4% profit margin by 2020, opening at a faster rate would make this more difficult and also risk cannibalising sales. After years of battling accounting scandals and pulling back from some international markets, Tesco is at least back on the front foot and taking the battle to the discounters. But we expected a more aggressive store opening schedule and Aldi and Lidl are unlikely to be too concerned about this opening salvo.”
Lidl and Aldi have shaken up the UK grocery trade, nearly doubling their market share to 13.1% in the last five years. Discount retailers growth has continued to outpace that of traditional supermarkets, forcing companies like Tesco to rethink their strategies and cut down the prices of essential items.
Tesco has also launched an array of lower price goods under in-house brands such as Creamfields, Butcher’s Choice and The Growers Harvest.
Jack’s store will not feature these lower price brands, instead 1,800 of 2,600 products available in the store are a new own-label brand bearing the new chain’s name. Unlike Tesco with its over 30,000 product offering, Jack’s will focus on simplicity and efficiency. Lewis believes that “People want a simple shop” and its ‘highly curated’ selection will allow that.
Lewis also said that Jack’s will use Tesco’s supply chain and ‘will leverage size of Tesco to lower operating costs at Jack’s’.
The layout of the new chain is similar to the one of Lidl or Aldi, even featuring a discount aisle in the middle of the store on the ‘when it’s gone, it’s gone’ basis.
Also similarly to Aldi and Lidl, Jack’s is heavily marketing its commitment to British-made products with signs reading ‘8 out of 10 products are grown, reared or made in Britain’ and union jack flags all over the aisles.
While customers won’t be able to order their shopping online, Jack’s will feature three payment options – traditional checkout, self-service checkout, and app checkout.
Despite being in the making for over two years, Tesco has kept the details of Jack’s chain under secrecy until now, with visitors to the mock store at Tesco head office in Welwyn Garden City reportedly asked to sign confidentiality agreements before entering.