Tesco discount division to challenge Aldi and Lidl at their own game

Tesco discount division may challenge Aldi and Lidl at their own game

Tesco is leaving all options on the table as it responds to the growing challenge faced by discounters Aldi and Lidl with reports suggesting it is prepared to open a ‘new retail format’ backed by an initial contingent of 60 stores.

It is suggested that the cut price subdivision could be branded Jack’s, in reference to Tesco founder Jack Cohen, with the trial likely to get underway as early as September.

Speculation has reached fever pitch following the appearance of online adverts at the weekend seeking customer assistants to man the new stores in which Tesco wrote: “The new retail format will be operated separately from the core Tesco business and as such benefits offered will be different from those offered at Tesco.”

The radical move is part of a rear-guard action by the market leader to prevent further erosion of its customer base which has come under increasing pressure from the migration of price-savvy consumers to the discounters.

Analysis by GlobalData has shown that Aldi and Lidl have seen their combined market share leap from 2.9 to 9.4% at the expense of Britain’s established ‘big four’ chains led by Tesco and including Sainsbury’s, Asda and Morrisons.

Tesco faces a fine balancing act in building a new brand from scratch and achieving necessary growth without cannibalising sales from existing Tesco outlets, a feat Sainsbury’s failed to pull off when it partnered with Netto in 2014 for a similar discount operation, only to pull the plug two years later.

A wider reorganisation at Tesco has seen the retailer scrap its Tesco Direct website to focus on its core grocery business.

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