Tesco has launched its new discount store format called Jack’s, as it attempts to take the fight to German discounters Aldi and Lidl.
The supermarket giant plans to open between 10 and 15 branches over the next year, investing at least £20 million in the project and creating up to 250 new jobs.
The brand is being widely hailed as a challenger to Aldi and Lidl, which have eaten into the market share of Britain’s so called “big four” supermarkets.
Like the German duo, Jack’s stores will have lower operating costs than Tesco outlets due to their smaller range of products and simplified design.
Tesco boss Dave Lewis said the prices will be “the cheapest in town” at each location.
“We leverage the size and expertise that’s available to Tesco and Tesco partners and we bring that capability to Jack’s in an operating model that is lower and we pass that benefit on to our customers,” Mr Lewis said on Wednesday.
He added that the move, which has been under discussion at the supermarket for more than two years, is in response to consumer desire for a “smaller, simpler range at shops”.
Jack’s will carry 2,600 lines compared to tens of thousands in Tesco.
Of these, 1,800 will be own-brand products under the Jack’s label, sourced from the Tesco supply chain.
Some 350 Tesco suppliers are involved in Jack’s. Eight in 10 products on the shelves are grown, reared or made in the UK.
The first two stores are set to open on Thursday in Chatteris, Cambridgeshire, and Immingham at formerly “mothballed” Tesco sites.
At least five Jack’s stores will be converted Tesco locations and the rest will be newly acquired. One of the new openings will be located next door to an existing Tesco store.
Staff at existing Tesco stores slated for conversion have all been offered roles either at a Jack’s or a Tesco but some have opted for redundancy.
However, Mr Lewis admitted that staff at Jack’s will not be paid the same as employees at Tesco stores, but will instead be on “more of a base rate pay”.
Unlike Tesco, Jack’s will not have an online offering and customers will not be able to use their Tesco clubcard in the stores.
Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said shoppers are unlikely to visit Jack’s regularly.
“Plenty of people buy from Aldi and Lidl – around 60% of all households shop in each of the discounters at least once a year,” he said.
“However, they spend just £1 in every £10 there and don’t shop at the discounters as frequently as at the big four – given the Jack’s model is so similar we would expect to see shoppers behaving the same way in its stores.”
Matt Jeffers, managing director of Accenture Strategy, said: “We should expect to see more of the established players revisiting their store models, exploring mergers and acquisitions and building partnerships with competitors to head off intense competition and fight for customers.”
The launch of Jack’s is part of Tesco’s centenary celebrations which will see the business mark 100 years in 2019. Jack Cohen founded Tesco 99 years ago in 1919.