National News

Supplied by

Tesco may challenge Aldi and Lidl with ‘new retail format’

3:13 pm, 23rd July 2018

Britain’s biggest supermarket chain is reportedly considering opening up to 60 trial stores named Jack’s, after Tesco’s founder Jack Cohen, in September.

Speculation intensified at the weekend after online adverts appeared containing the text: “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.”

The Mail on Sunday said Tesco’s trial sites included Immingham in Lincolnshire, Chatteris in Cambridgeshire and Wandsworth in south London.

Thomas Brereton, retail analyst at GlobalData, said: “Since 2008 Aldi and Lidl have increased their combined market share from 2.9% to 9.4%, at the expense of Tesco and the rest of the “big four”, who have all struggled to respond.

“The possibility of Tesco opening a discount fascia in a bid to neutralise the growing threat posed by German discounters Aldi and Lidl looks a bold move, but orchestrating the emergence of a new brand without damaging the reputation of the main Tesco image will require pinpoint precision to succeed.

“Sainsbury’s attempted a similar concept in 2014 through a partnership with Netto, and its closure two years later came as a result of their failure to expand quickly or sizeably enough.

“Tesco could face a similar issue down the road; reports of an initial 60 stores would be a promising start, but expanding this to the couple of hundred or more needed for viability (without taking too many sales from existing Tesco locations) will be challenging.”

Tesco last tried the discount approach in the 1980s under the Victor Value brand, but that was abandoned after executives blamed it for undermining the main Tesco brand.

Mr Brereton said that Tesco’s chief executive, Dave Lewis, “will be keen to avoid deja vu, and may feel that the price-led customers of 2018 will not be as discriminating against own-label products as shoppers were 30 years ago'”.

Earlier this month, Tesco agreed a strategic alliance with France’s Carrefour to use their joint buying power to cut costs, with the aim of passing savings on to customers.

Customers have defected from Tesco and its other big four rivals to Aldi and Lidl since the recession amid rising food prices and squeeze on wages.

Tesco declined to comment.