In a bid to level the playing field with successful discounters, Tesco looks poised to launch a new retail concept. It’s part of a robust strategy from the supermarket giant to cut supply costs and pass savings on to customers.
The belief is that Tesco is about to launch new stores under the “Jack’s” brand.
The name originates from the chain’s founder, Jack Cohen. It looks set to be an initial 60 outlets, positioned as direct competition to the likes of Lidl and Aldi. Pundits believe that the first outlets will be unveiled in September.
New retail format
Evidence of this includes the company’s own statement in its current retail recruitment ads. Job advertisements online have stated that: “The new retail format will be operated separately from the core Tesco business and as such benefits offered will be different from those offered at Tesco.”
According to speculation in the UK media, Lincolnshire, Cambridgeshire and Wandsworth in South London are going to be the first locations for Jack’s supermarkets.
No doubt executives and directors at the other big supermarket brands will be watching this development with great interest. The biggest difficulty Tesco faces is establishing a discount arm without devaluing their existing brand.
The popular view is that Tesco CEO Dave Lewis will also find it particularly challenging to gauge the speed of expansion that could best sustain the Jack’s concept. There needs to be enough stores opened in the initial phase to make discounting economically viable. Then the rollout also needs to be seamless.
Of course, having a supply chain set up to offer goods at a feasibly low price is also pivotal.
In recent times, Tesco has bought up wholesaler Booker. It has also formed a new alliance with multinational retailer Carrefour to create much stronger joint buying power. Both of these developments will enable Tesco to manage costs more effectively and cut costs for customers.
Previous attempts failed
This discounting experiment is one that Sainsbury’s has already tried, without success. Sainsbury’s and Netto formed a partnership in 2014 to create a lower cost outlet, but the innovation was scrapped within two years.
Nor is this Tesco’s first foray into the discount sector.
In the 1980s, the company launched – and then abandoned – a brand called Victor Value. Evidence at the time suggested it folded due to executive backlash against the impact the new concept was having on Tesco’s image.
Times have changed though, and discounting is now both acceptable and expected.