Tesco plans discount chain

Tesco Metro stores

Tesco is going head-to head with Aldi and Lidl, as speculation mounts that the supermarket giant is gearing-up to open a new chain of discount stores.

The Mail on Sunday has reported that up to 60 stores could be launched as soon as September, most of them replacing Tesco Metro outlets.

It is rumoured the stores will be called Jack’s, following an attempt by a Tesco subsidiary to trademark the name. The company was founded by Jack Cohen in 1919.

The new stores will carry around 3,000 SKUs, compared to the 25,000 found in an average Tesco Extra.

Industry insiders are speculating that the stores may adopt a Costco-style format, following Tesco’s £4bn buyout of wholesaler Booker at the beginning of the year.

The company has remained tight-lipped on the matter but said a medium-sized Metro store in St Helens near Liverpool is to reopen under a new name. Meanwhile, workers at another Tesco Metro in Liverpool earmarked for closure have been offered jobs at a new store due to open in the next five weeks, the Guardian reported. The company is also recruiting for new-format stores at two of its mothballed sites in Lincolnshire and Cambridgeshire.

Tesco is still far and away the nation’s biggest grocer with over 27% market share. However, it has been losing ground to the discounters as consumers move away from big weekly shops to more regular top-ups.

Speaking to the Mail, Grocery Insight’s Steve Dresser said: “It’s difficult to take on Aldi and Lidl, but if Tesco can get it right this could run and run.”

“There is an opportunity to look at any [Metro] stores still struggling and say, ‘let’s see if we can try something else here rather than closing them and losing them to a competitor’.”

Thomas Brereton, Retail Analyst at GlobalData, said the possibility of a Tesco discount fascia was “a bold move” but one that 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,” he said.

Tesco’s most recent foray into discount was with its Victor Value brand in the 1980s. Victor ended in defeat after four years, over fears from management that it was undermining the main brand.

Brereton said of this: “CEO Dave Lewis will be keen to avoid a déjà 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.”