Tesco has started a new front in its battle to win back shoppers from Aldi and Lidl with the launch of a new discount chain Jack’s that promises to be the “cheapest in town”.
The first two Jack’s stores – named after the supermarket giant’s founder Jack Cohen – will open on Thursday. Tesco’s chief executive, Dave Lewis, said the chain would sell low-priced, predominantly British food and appeal to the “economically challenged that need a bargain and the affluent shopper that wants a bargain”.
He added: “We will be the cheapest in town. There are full-range, full-service supermarkets, and clearly people want that, but there is a gap in terms of people wanting smaller, simpler, quicker shops and local produce.”
A typical large Tesco supermarket sells more than 25,000 products but Jack’s will stock only 2,600 products – about the same as Aldi and Lidl. Nearly 70% of the products, from milk to eggs, bread and fresh meat are branded as Jack’s but the stores will also sell 700 big-name branded lines including Coca-Cola, Bovril and Lea & Perrins Worcestershire sauce.
Lewis said Tesco had been working on the new Jack’s brand for nearly three years and insisted the overt British branding, with union jacks prominently displayed on packaging, was not a response to Brexit. “It’s nothing to do with Brexit,” Lewis insisted. “It is what customers are asking for.” About 80% of the food on the shelves will be sourced from the UK.
The first Jack’s stores are in the small Cambridgeshire town of Chatteris and Immingham, Lincolnshire. They had been empty since 2014, when Tesco was rocked by an accounting scandal and had to cut costs.
Lewis said the group planned to open 10-15 Jack’s stores over the next six months. About half will be converted Tesco outlets, while others will be next to existing Tesco stores and some on new sites.
The store’s focus on British products is designed to differentiate it from Aldi and Lidl, which stock hundreds of lesser-known European brands. The decor emphasises Tesco’s long heritage, with pictures of Cohen – who was nicknamed “Slasher Jack” for his “pile it high, sell it cheap” approach – adorning the walls. The layout and displays, with potatoes sold out of hessian sacks, is inspired by Cohen’s market-stall roots.
Jack’s will check prices against local rivals but the new chain’s claim to be the cheapest in town will be quickly tested by Aldi, which signalled it could launch a fresh round of price cuts in its Chatteris store, which is less than a two-minute drive away. “Our customers will always pay the lowest grocery prices in the UK every time they shop with us,” an Aldi spokesman said.
The German retailers Aldi and Lidl have shaken up the UK grocery trade, nearly doubling their market share to 13.1% in the last five years. Their growth continues to far outpace that of traditional supermarkets. Tesco, which accounts for £27.40 out of every £100 spent in UK supermarkets, compared with nearly £32 at its peak, has hired the former Aldi executive Lawrence Harvey to run Jack’s.
Jack’s stores follow the familiar basic layout of an Aldi or Lidl, with wide aisles and products stacked on pallets on the shop floor to save time and money. There is an aisle devoted to promotions on big-name grocery brands, such as Kellogg’s Coco Pops and McVitie’s Jaffa Cakes, which will change every few weeks. There is also an aisle of homewares on a “when it’s gone, it’s gone” basis, another familiar discounter tactic. This week’s offers include a candy floss-scented unicorn pillow pet for £8 and £6 Playmobil sets.
Tesco Clubcards will not be accepted in the new stores.
Jack’s stores, which will have polished concrete floors instead of tiles to keep costs low, will have fewer staff than a Tesco of the same size. Workers, who will wear their own clothes rather than a uniform, will earn more in basic pay per hour than Tesco staff – £9 per hour compared with £8.18 at present and £8.42 from November at the main supermarket and £8.85 at Aldi. However, Jack’s workers will not get a staff discount or an annual bonus, unlike Tesco employees.
- Tesco: 27.4
- Sainsbury’s: 15.4
- Asda: 15.3
- Morrisons: 10.2
- Aldi: 7.6
- Co-op: 6.6
- Lidl: 5.5
- Waitrose: 5.1
- Iceland: 2.1
- Ocado: 1.2
- Others: 3.5
Market share (% in the 12 weeks to 9 September 2018)
Some analysts were disappointed by the limited scope of Tesco’s plans for Jack’s, given that it has nearly 2,700 UK stores. Jonathan De Mello, the head of retail consultancy at Harper Dennis Hobbs, described the plan as “bringing a knife to a gunfight”. He said: “Either they push [Jack’s] hard or don’t do it at all.”
Tesco will hope Jack’s, which coincides with the company’s centenary next year, has more staying power than the discount chains tested by its mainstream rivals. Sainsbury’s opened a string of Netto stores with the Danish chain’s parent group in 2014, only to shut them two years later after struggling to make a profit. Asda’s 2006 experiment with the Asda Essentials chain also closed swiftly.
Increased competition has resulted in Sainsbury’s and Asda, the UK’s second- and third-largest supermarket chains, proposing a merger in an effort to cut costs, prompting an investigation by the competition watchdog.
The Competition and Markets Authority said on Wednesday it would examine whether shoppers could face higher prices or poorer quality of service in hundreds of areas where the stores overlap. It will also examine the potential impact on the fuel and clothing markets as well as on suppliers.