Can Tesco's discounter Jack's succeed where others have failed?

The supermarket group looks set to launch an attempt to take on Aldi and Lidl. Sainsbury's has already tried and failed to do that

James Moore
Chief Business Commentator
Monday 23 July 2018 11:09
Planning a new brand? Tesco has reportedly settled on 'Jack's' as the name of its new discounter
Planning a new brand? Tesco has reportedly settled on 'Jack's' as the name of its new discounter

Tesco choosing 'Jack’s' as the name for its Aldi/Lidl competitor is a bit unfortunate if you think about it. A discounter sells itself on its low low prices, but you use a jack to raise something up. Then of, of course’s, there’s ‘Jack the Lad’. Hardly, a concept a grocer wants to be associated with.

The thinking behind it, as I understand, is to pay tribute to Jack Cohen, the man who started it all.

But whatever Tesco does with the brand, it seems intent on pressing ahead with idea.

Reports indicate that up to 60 sites have been identified for the new venture. I expect that the true number will prove to be quite a bit lower than that. Regardless, the concept could soon be with us.

Will it fly?

Tesco and its rival supermarket groups have a problem: There is a marked lack of anything resembling growth out there for them.

They have good quarters when they’re on their uppers (like Tesco has been recently), they have bad quarters when they’re on their downers (hello Sainsbury’s). But overall, the grocery market isn’t doing much and the big players are struggling to push sales growth above the level of food price inflation.

The exception is Aldi and Lidl’s part of the market. They’re still growing like Japanese knotweed. It’s not just because of consumers' desire for ultra low prices either; their mid sized local store format is favoured by people who increasingly prefer to shop little and often.

So why not join 'em?

Tesco has the wherewithal to make it work.

Aldi and Lidl’s ability to price as they do rests on their offering a limited range of products that they buy in vast quantity.

Tesco has clout to replicate that formula, buttressed by the purchase of wholesaler Booker that its starry CEO David Lewis pushed through, and the recent 'strategic' buying alliance struck with French giant Carrefour.

The problem he faces with this latest venture is that ‘Jack’s’ will require Tesco to operate a very different business model, one that it will have to run alongside the existing one.

Big British companies that have previously tried to to that in response to the emergence of disruptive competitors have struggled. Remember when British Airways attempted to take on EasyJet with a low cost airline called Go? That didn’t last long after the departure of CEO Bob Ayling, with EasyJet eventually picking up the pieces.

A more recent, and relevant, example is closer to Tesco’s home market. Seeking to jack up its growth, Sainsbury’s partnered with Danish discounter Netto to set up a discounter. The venture, to which Sainsbury’s never really seemed fully committed, was abandoned after only a couple of years.

So Dave’s Jack’s is not only trying to take on two entrenched rivals. It’s going to be swimming against the tide of corporate history.

For it to to that successfully, it will require the commitment, and staying power, of both him and his senior colleagues, at a time when top bosses rarely stay longer than five years in post.

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