Shoppers have a new supermarket option to consider as Tesco launches a new cut-price brand named after the firm’s founder.
The chain is positioned to compete more directly with German supermarket chains Lidl and Aldi, which have increasingly eaten into the profits of larger chains such as Tesco.
The launch comes on the same day as the announcement of an investigation into the merger of two of the other largest supermarkets in the UK, Sainsbury’s and Asda.
The new chain named Jack’s, after the founder of Tesco Jack Cohen, will stock 80% of its food and drink produce with British products, Tesco says. The chain will have its own brand of products, also called Jack's.
The chain will copy the successful stocking technique of Lidl and Aldi, so-called “when it’s gone, its gone”. This means that certain products will have limited stock and won’t necessarily be continually replenished. Tesco say this low-cost business model will "keep costs low and prices down." This means outlets will be 'minimalist', with few extra fixtures and fittings compared to a typical supermarket.
Tesco says in the nest six months it will launch between 10 and 15 stores around the UK. The first are set to open on 20 September in Chatteris Cambridgeshire and Immingham, Lincolnshire.
Most of the stores will be converted from existing Tesco Metro stores.
Tesco and the other traditional supermarkets have been battling for years now with the rising popularity of budget supermarkets Aldi and Lidl. The budget rivals operate a different business model, which often enables them to offer lower prices than the encumbents. They stock much less variety, which keeps operations leaner, and they specialise in 'pile 'em high' seasonal offers, with stock that is for sale until it's gone.
Competing on price without completely overhauling the way they operate has proven difficult for the traditional supermarkets, gnawing away at their margins. As an alternative, in 2014 Sainsbury's revived the Netto brand to create a string of stores using a similar model to the budget supermarkets. It saw this as a way to operate in that space without impacting the Sainsbury's brand. However the venture failed and the stores were closed two years later.
Tesco now looks to be trying out a similar strategy, creating through Jack's a brand that competes with the budget supermarkets head on.