British market leader Tesco is closing its discount chain Jack’s, which could never live up to the expectations in the battle with Aldi and Lidl. They are far from alone: success stories in this regard are very rare. Yet “we have learnt a lot”, says the retailer.
The cheapest
Fighting the hard discounters with their own weapons: many retailers have tried, few have been successful. However, when Tesco opened the first two branches of discount chain Jack’s in September 2018, expectations were high. The new chain would be cheaper than rivals Aldi and Lidl, which threaten traditional supermarket chains with their policy of low prices and sustained expansion.
Then-CEO Dave Lewis told BBC that Tesco had been thinking about what customers want, and bringing it to them in the most cost-effective, value-orientated way possible. “The objective is to be the lowest cost for customers.” The discount chain sold a range of around 1,800 references, including 800 under the Jack’s private label.
More efficient
Tesco initially envisaged a rapid expansion with Jack’s: the chain would open ten to fifteen shops in six months time. That turned out differently: four years later, the chain still has opened only thirteen branches, and they are now all closing. Six premises are being converted into Tesco supermarkets, the other shops are closing permanently. The cheap house brand will remain available for independent retailers who get their supplies from Booker, the wholesaler owned by Tesco.
Yet the British market leader emphasises that this story is not all negative. “We have learnt a huge amount from Jack’s and this has helped Tesco become more competitive, more efficient and strengthened our value proposition, including through the launch of Aldi price match,” he says in The Guardian. The CEO is referring to the pricing strategy whereby Tesco aligns the selling prices of hundreds of products with the price level at Aldi.
A trade in its own right
Tesco is not the first or only food retailer to try its hand at a hard discount chain. Belgian supermarket Delhaize has even had two attempts to compete with Aldi: in the 1970s through its Dial discount chain, which was only discontinued definitively in 1997, and just a few years ago with Red Market. On the other hand,GB (now Carrefour) tried the same with the chain Goal. More recently, we saw unsuccessful partnerships between Sainsbury’s and Netto in the United Kingdom, and between Carrefour and Dia in several European countries.
The consensus in the sector is that discount is a profession in its own right, that requires a strong, lean organisation and a completely different mindset than that of a classic supermarket company. But in the meantime, Carrefour is trying again, with the low cost chain Supeco, a so-called ‘soft discounter’ that now has about thirty shops in France and is also active in Spain, Italy, Romania, Poland, Brazil, Morocco and Senegal.
