Following news at the weekend that Tesco is rumoured to be planning a new discount format – Jack's – analysts have speculated on what impact the new banner could have on both the market and on Tesco's internal structure.
According to the The Mail on Sunday, Tesco is planning as many as 60 stores under the Jack's banner, the name of which is said to be a reference to Jack Cohen, Tesco's founder.
Potential locations include London, Cambridgeshire, Lincolnshire and Liverpool, according to the paper.
Not The First
Commenting on the reports, Barclays European Food Retail Equity Research noted that it is 'not the first press story' to suggest a possible discount chain by Tesco, 'which the company itself has neither confirmed nor denied. We are generally wary about the launch of new grocery chains because experience suggests to us that very few of them succeed.
'However, if Tesco does indeed give this a try, then the risk would be limited if it was converting existing stores, rather than taking on expensive new leases,' Barclays further noted.
In addition, Clive Black of Shore Capital suggested that the new format, at least on a conceptual level, "represents a complicating factor into the business, the financial outcome of which will be interesting to note in time.
"That said, Dave Lewis, CEO of Tesco, has misplaced few steps in his time at the helm. Hence, if Jack is not another retail edition of retail fiction, then it will be fascinating to see what emerges, transpires and ensues," said Black.
History Lesson
Black also feels that "history is not really on Tesco's side", recalling the fact that the retailer previously operated a discount franchise, Victor Value, that was wound up in 1986, while Asda ran a banner called Dale's, and Sainsbury's recently trialled the Netto concept.
"Indeed, at the end of the day, we ask ourselves why a Tesco, with its scale still more commanding in the UK over Aldi and Lidl, cannot focus upon the price-value component of its offer," Black added, "noting that the LADs are moving up the value chain, and so into the mainstream supermarkets' demesne, with a continuum of work across its estate that progressively narrows the gap on known value items (KVIs) and simultaneously improves product quality, through the existing Tesco family of labels, noting, as we do, the progressive disappearance of the Everyday Value label?"
Avoid A Carbon Copy
Elsewhere, Bryan Roberts, global insights director at marketing group TCC Global, told The Mail on Sunday that he believes that Tesco should "avoid a complete facsimile of Aldi or Lidl and come up with something different because otherwise it's not going to be compelling enough to win shoppers back from the Germans.
"The key thing is scale. They need to go at it hammer and tongs. Otherwise, it will never escape the shadow of their main business," Roberts added.
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
