Tesco Discount Format: How Successful Can Jack’s Be?

It’s not long since Tesco’s launched the first of its Jack’s stores in Cambridgeshire, with three further stores opening since in Immingham, St Helens and Edge Hill. Jack’s is a chain that has been introduced to compete directly with the discounters, with Dave Lewis claiming that Jack’s is now cheaper than Aldi and Lidl. The discounters have since launched their own campaign combatting the comments. But how successful can Jack’s be? We take a look at the growth of the discounter channel and the size of the pie for newcomer Jack’s.

Demand for discounters is getting stronger

Growing inflation, rising interest rates and Brexit uncertainty are just three of the things that are putting pressure on household disposable incomes. In fact, 12 out of the 24 months have seen inflation grow faster than wages. Many shoppers are looking to discounters to reduce their food costs and make their hard earned income go further. This is highlighted by the HIM Barometer Tracker that shows a rise in penetration of UK shoppers to Aldi and Lidl over the last two years from 49% to 59% in a week.

Furthermore, as part of our Barometer Tracker we asked 1,000 shoppers if they would like to see more discounter stores on the high street and in their neighbourhoods. Some 30% of respondents say that it would be useful and 33% say that it is absolutely needed, with female shoppers more likely to think that it is absolutely necessary compared to male shoppers.

A range to compete

Compared with Tesco, the range in Jack’s will be a lot more limited and will have large emphasis on own label and local produce. These are key to making the business model simple and the business cheaper to operate; allowing them to pass savings onto the consumer. This is a model that has been implemented by Aldi and Lidl with great success.

However, range will be a clear point of difference between Jack’s and other discounters. Jack’s is planning to sell around 2,600 more products than Aldi and Lidl. Our HIM High Street Study 2018 shows that 37% of Aldi and Lidl shoppers are on a main shopping mission. We know that these are the most valuable shoppers who have a higher basket seize and spend. If successful, Jack’s will be looking to attract more shoppers on a main shopping mission and a larger range may give them the kick start they need.

A base for growth

With the backing of the Tesco brand and the infrastructure available, Jack’s is in a fantastic position to grow quickly and build a brand presence to compete. Our Barometer Tracker already shows that 61% of UK shoppers have heard of the launch of the new discounter. Interestingly, this number increases to 80% when you look at respondents aged over 55 years old. Older shoppers are also more likely to shop in the discounter channel – 39% of discounter shoppers are 55+, compared with 35% for the food and grocery average.

For a brand that only has four stores this is a great base to build brand saliency and compete with the discounters. With 53% of UK shoppers saying they will probably or definitely visit the new Jack’s stores there is a bright future ahead or certainly a fantastic opportunity for the retailer to impress.

As it stands, Tesco has announced very moderate plans for Jack’s, with only 10-15 stores to be opened in 2019. However, we can be sure that if the growth in the discounter channel continues and the model works for Tesco the store opening numbers could be revisited and the competition could intensify.

 

Winning in Discounters Report 2018

Your comprehensive insight report into the discounter channel and shopper, including:

  • Where are shoppers shopping on the high street?
  • How important is price when influencing shoppers?
  • What factors impact decision making?
  • How do these factors differ by mission and category?
  • An overview of the competitive landscape of the discounter channel
See more details

 

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