UK grocery giant Tesco is preparing to launch its own discount chain as early as this September, as the supermarket prepares to go toe-to-toe with German discounters Aldi and Lidl.
The chain may be named Jack’s after a division of the grocery group recently attempted to register the name as a retail trademark.
Up to 60 stores could be launched by the UK’s biggest retailer, which is advertising for staff for a new format in Immingham, Lincolnshire, and Chatteris, Cambridgeshire. Both of these are sites that Tesco has sat on for around four years. It is also looking to open a store in Wandsworth, south London.
The company has confirmed that a medium-sized Tesco Metro in St Helens in Merseyside will reopen under a new name while staff at Tesco Metro in Edge Hill, Liverpool, which is set to close, have also been promised potential jobs at a new store set to open within five weeks.
Online job ads for some of the sites state: “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.”
Workers at closing Tesco Metro stores are being made redundant and will have to reapply for the new jobs.
Traditional supermarkets have been searching for a way to get into the fast-growing discount market, having seen the German rivals Aldi and Lidl win over their shoppers since the last recession, when rising food prices encouraged Britons to shop around for their groceries.
Rumours have been circling about Tesco developing a discount chain since it promised shareholders in February that it would “develop new formats to better serve customers”. It was said to have drafted in Lawrence Harvey, a former Aldi executive, to help develop the concept and sought advice from Boston Consulting Group. It asked a number of key own-label suppliers to sign non-disclosure agreements before contributing to a new project.
RPA Perspective As well as Aldi and Lidl, general discounters including B&M, Wilko and Poundland have also increased the amount of food they sell, stealing sales away from traditional chains.
Sainsbury’s partnered up with the Danish chain Netto in 2014 to launch a UK discounter, but the venture closed down its 16 stores two years later after struggling to make a profit.
Tesco last tried the discount route in the 1980s under the Victor Value brand. However, the move was abandoned after four years because the management team at the time feared it might undermine the main brand.
Aldi and Lidl now account for nearly 13% of the UK grocery market according to Kantar Worldpanel data, compared with less than 9% four years ago. They are increasing sales by more than 8% a year while sales at the big four supermarkets – Tesco, Sainsbury’s, Asda and Morrisons – are largely static.
The new format is also a key part of Tesco’s purchase of the UK’s biggest wholesaler, Bookers, which has prompted rumours that the stores might be more akin to Costco, the cash-and-carry business. Tesco has already tried stocking bulk-buy items from the Bookers range in its stores.
The size of the stores Tesco is looking at converting and its note to potential job applicants that they would be part of a small team, suggests a discounter or pared-down format similar to, for example, Colruyt in Belgium, which is a hybrid between a cash-and-carry and a discounter.
