Tesco is ending its Jack’s discount store experiment less than four years after it was launched.
The company introduced the format in September 2018 as part of moves to combat the rise of Aldi and Lidl. It initially set out plans to open up to 15 stores in the first six months, although Tesco ultimately developed just 13 Jack’s sites.
Six of the stores (Chatteris, Immingham, Edgehill, Rubery, Sheffield and Wakefield) will now be converted into Tesco superstores, while the remaining seven (Hull, St Helen’s, Walton, Castle Bromwich, Middlewich, Barnsley, and Liverpool North) will be shut permanently over the coming months.
Reports in the last few years suggested that the Jack’s stores had failed to win over shoppers in areas where Aldi and Lidl had outlets. However, Tesco yesterday insisted that the discount venture had helped the wider business become more competitive and efficient. This included the launch of its Aldi Price Match scheme and Fresh 5 fruit and veg discount proposition which it rolled out across the group.
“This has enabled us to consistently attract new customers to Tesco from our competitors over the last two years and we know they increasingly recognise the value they can find at Tesco,” said Jason Tarry, Tesco’s UK & Ireland Chief Executive.
“With the learnings from Jack’s now applied, the time is right to focus on ensuring we continue to deliver the best possible value for customers in our core business.”
Tesco confirmed that the Jack’s name will live on, with Jack’s branded products available to independent convenience stores supplied by Booker. Several of the wholesaler’s Happy Shopper, Euro Shopper, Discover the Choice, and Farm Fresh lines are being phased out and replaced with alternatives from the value-orientated Jack’s range.
Commenting on the move, Bryan Roberts, an independent retail analyst at Shopfloor Insights, said: “It’s not really a huge surprise given they only have 13 stores. For something to work it does need scale.
“It’s an interesting experiment, and it joins a very long list of mainstream supermarkets who tried to enter the discount market and ultimately failed.”
Clive Black, a retail analyst at Shore Capital, added: “With respect to Jack’s, it was a case of when, not if, because the business was quite simply subscale. For an organisation like Tesco, 13 stores were a pimple on an elephant’s backside.
“Either that estate gets built up and rolled out, and the economies of scale kick in, or if it’s not rolled out, it’s very difficult to see where like-for-like sales growth comes from. With costs rising, Jack’s financial performance can only go backwards.”
Meanwhile, Tesco announced that it was shutting a further 317 meat, fish and hot food deli counters following 90 closures in 2019 as part of its business simplification strategy.
The company said it will shut counters at the shops with the “lowest demand” amid changes in customer habits. Tesco stated that it will “repurpose” the space with affected staff offered alternative roles in the business.
After the closures, just 279 Tesco stores will host food counters.
The company concluded that it was making the changes to its business to “ensure we remain focused and competitive in a fast-changing market”.
NAM Implications:
- Perhaps for Tesco, like most other retailers…
- …the New Norm is about reducing over-capacity as businesses transition to online.
- i.e. an excuse/opportunity for a great ‘clear-out’…
- …while ’hangers-on’ slowly succumb to market realities.
