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24/07/2018

Tesco set to open 60 stores in drive for discount market

Words: Huw Morris
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Tesco is poised to launch around 60 stores in a ‘new retail format’ to fight back against its discount rivals.

The stores, which will be named Jack’s after the supermarket chain’s founder Jack Cohen, would challenge German discounters Aldi and Lidl.

Trial sites include Chatteris in Cambridgeshire, Immingham in Lincolnshire, and Wandsworth in South London.

The company issued adverts online for staff at the weekend. These said the “new retail format will be operated separately from the core Tesco business”.

Thomas Bremerton, retail analyst at analytics specialist GlobalData, said the plan is 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”.

He added: “Since 2008 Aldi and Lidl have increased their combined market share from 2.9 per cent to 9.4 per cent, at the expense of Tesco and the rest of the Big Four, which have all struggled to respond.

“There are two issues Tesco must consider carefully – the longevity of the project given the scale necessary to make such a discount fascia profitable, and disrupting sales at the main brand through an erosion of brand image.”

He argued that Sainsbury’s attempted a similar idea in 2014 through a partnership with Netto. A failure to expand quickly or sizeably enough led to its closure two years later.

“Tesco could face a similar issue down the road; 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.”

Image credit | Shutterstock

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