Tesco Launches Jack’s – But Aldi Won’t Be Easy To Beat

Tesco recently have launched the first Jack’s low-price store, designed to take on the fast-growing German discounters, Aldi and Lidl, firms that have taken chunks of market share out of the traditional British supermarket firms like Tesco and Sainsburys in recent years.

The first store opened last month in Chatteris, Cambridgeshire and more will follow, 10 -15 over the next six months, but this is a relatively small-scale investment by Tesco, which lost a whole heap of money on their “Fresh and Easy” venture into the US in a previous expansion attempt.

I’ve become a fan of Aldi in the last couple of years as I have spent more time in the north-east with elderly parents (now parent) who were regular shoppers there. My observation as a customer is that Tesco should not think that Aldi’s success is purely about low prices.

I was there recently, and bought a lovely pack of Chestnut mushrooms (made a mean pasta dish) for 59p, their very tasty  Land of Liberty US style-IPA beer at 99p for 330ml, a couple of very interesting yoghurts (layered blueberry and blackcurrant), pickled silverskin onions for 49p a jar, and a Belgian chocolate mousse that is perhaps the best supermarket example of that genre I have ever tasted (eating it literally as I type – although I have just read the small print and it has 345 calories which is a bit worrying. But absolutely delicious).

I didn’t get their famous smoked mackerel, which at £1.45 a pack is less than half the price Sainsbury or Waitrose charge. But that all demonstrates that it is not just about price, or the somewhat weird random non-food items that appear in the stores. The quality of many Aldi products is excellent, like the mousse or their parmesan. The selection is interesting too – as per my yoghurts. And at times, like the mackerel, we are talking orders of magnitude cheaper, not just a few pence or percent.

So, they are obviously doing some interesting things in terms of buying and supply chain: I don’t know what, but Tesco can’t just think they can beat up suppliers for a few percent off Tesco usual prices and make Jack's viable. I do remember one article claiming that Aldi don’t mess suppliers around with discounts, payment terms, marketing allowances and so on – they just want good pricing, very good pricing, but otherwise are very easy and fair to deal with. Maybe there is something in that.

My other observation is the focus on efficiency. Aldi constantly opens and closes tills based on workload. Their staff jump on and off the till and go to stack shelves as soon as the queues die down. Their checkout bar code scanning equipment (or perhaps it is wider that that) seems incredibly efficient too – the speed of the checkout staff, and therefore the revenue per member of staff, is I would say twice that of other supermarkets. And there is no room for slow packers – you either move at the speed of the scanners and the assistant, or just stick your purchases back in the trolley and go and pack post-checkout transaction. None of that hated self-scanning, either.

So, my guess is that this will prove tough for Tesco. There might also be questions for suppliers around dealing with both Tesco and Jack’s – how could they offer lower prices to Jack's but maintain margin with Tesco? Some interesting supply chain dilemmas there.

All in all, I would not put money on Tesco succeeding with Jack's – but it is one of those things that the firm probably feels it has to try, without risking too much cash.

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Voices (4)

  1. Final Furlong:

    Aldi has about 1,800 SKUs whereas Tesco has about 60,000 (having dropped from 90,000). Aldi has figured out that consumers don’t want greater choice – they want to be presented with a reduced selection of consistent high quality products limited to a choice of circa three products per category. Thought this was a good insight:

    1. Sam Unkim:

      Let’s just hope NHS Supply Chain get the message !!

    2. Soupmaster:

      I’d refine that, customers want meaningful choices. 5 flavours of a decent tin of soup is choice. 5 brands of tomato soup is bloat.

    3. The Lady Doth Protest:

      Absolutely right. Tesco is the classic example of what’s known as the Paradox of Choice. https://www.youtube.com/watch?v=VO6XEQIsCoM Too much choice is paralysing; so Aldi restricting the number of SKUs actually works in its favour.

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