Tesco’s chief executive Dave Lewis has said that the launch of Jack’s, a new discount chain that promises that ‘8 out of 10’ products will be sourced from Britain, is nothing to do with the impending Brexit.
Commenting at the launch of the new concept in Chatteris, Cambridgeshire, Lewis said that the strong UK sourcing focus evident in the store was due to customer feedback, rather than the retailer insulating itself against potential Brexit sourcing challenges.
“It’s what our customers told us,” Lewis explained. “It’s nothing to do with Brexit. We started this programme and the research with customers way before Brexit.
“What they told us is that the idea of ‘provenance’ and ‘local’ is something that they value. It’s something that they don’t have currently, the ability to source the majority of products in Britain.”
Store Rollout
Tesco intends to launch “10 to 15” stores under the Jack’s brand in the coming year, with an investment of between £20 million and £25 million earmarked for the openings.
“In Tesco terms, that’s very modest in terms of capital expenditure,” Lewis explained.
Lewis iterated that the lower cost of products in-store was as a result of the lower operating costs of the Jack’s store format, with the Chatteris store set to boast around 2,600 products, compared to four or five times that in a typical Tesco.
“The intention is for us to be the cheapest in town,” he said. “The cost of running this operation allows us to lower the price.”
Similarly, the wage structure of employees at Jack’s will be “different” to that of a typical Tesco, he said, with workers earning more of a “base rate of pay” to that earned by employees in mainstream Tesco outlets.
Cannibalisation
Lewis also admitted that he was “not concerned” about the potential for the Jack’s stores to cannibalise existing Tesco outlets, with the group even contemplating opening a Jack’s outlet adjacent to a Tesco, to “test” how that cannibalisation could occur.
“It’s a very competitive market,” he said. “In all of my career of 30 years I would rather cannibalise myself than have someone else cannibalise me. I think our job is always to push ourselves to do better.
"I would much rather a situation where Jack’s is challenging Tesco than anyone else.”
Analyst View
Commenting on the new store concept, Frazer McKevitt, head of retail and consumer insight at Kantar Worldpanel, said, "“Jack’s isn’t going to make an immediate dent in the competition’s market share – not at the rate of openings announced today.
"For context, there are already over 1,300 Aldi and Lidl stores across the country and the two have a combined market share of 13.1%, so Jack’s is clearly playing a longer-term game.
“With its heavy Union Jack branding and promises on provenance Jack’s is clearly looking to make its name as a solid British retailer. Nearly half of shoppers try to buy local produce when they can so it could be a savvy move, though it’s still very early days.”
© 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.
