Tesco Ditches Jack’s As Discounter Flops Amid Strong Grocery Sales

The U.K.’s biggest supermarket chain Tesco is to close seven of its discount Jack's stores, while the remaining six branches will be converted into Tesco superstores.

Despite annual sales likely to hit the top ened of forecasts, Tesco announced the end of a format that was supposed to take Lidl and Aldi head-on yesterday, as it also confirmed that meat, fish and deli counters at 317 store sites would be also be shut down because of changes in customer demand.

This morning, Tesco additionally warned that 1,600 jobs are at risk as it ends overnight restocking at some stores and converts some gas station sites to pay-at-pump during the night. It said restocking shelves during the day would mean more staff on the shop floor at peak times.

Overnight restocking will switch to daytime in 36 large stores and 49 convenience stores, with plans to convert 36 gas station stores to pay-at-pump overnight.

But the big news was the demise of it discount fascia. Tesco launched Jack's in 2018 to tackle the threat from the German discounters and other home grown discount formats, which until recently had achieved most of the growth across grocery sales.

Tesco saw the new no-frills format as a way to rival this threat and yet ambitious growth plans began to unravel almost before they started and Jack’s – opened with great fanfare – quickly became no more than a footnote in Tesco trading updates. So what went wrong and why?

Jack’s Takes On Aldi and Lidl

Jack’s launched on 20 Sept. 2018 amid a veil of secrecy after a much-anticipated run-up, as a direct competitor to Lidl, Aldi and the rising band of U.K. discounters. Part of the Tesco family, Jack’s – named after Tesco founder Jack Cohen – was created to “offer great tasting food that is grown, reared or made in Britain at the lowest possible prices to bring customers outstanding value”.

Jack’s emerged during the tenure of Tesco’s former chief executive, Dave Lewis, and launched in the company’s centenary year. The retailer claimed to have spotted a gap in the market for shoppers wanting “smaller, simpler” stores that sold more British produce. Indeed, eight out of 10 food and drink products offered were grown, reared or made in Britain and the stores feature an own brand range, also named Jack’s, plus familiar grocery brands and a range of general merchandise on a ‘When it’s Gone, It’s Gone’ basis.

Jack's stores stocked 2,600 products - far fewer than the 35,000 carried by a typical Tesco supermarket - with 1,800 branded Jack's.

Chatteris, Cambridgeshire was the first store to open, along with Immingham, Lincolnshire on the same day, and the interior exuded a no fuss approach with no fancy fixtures or fittings, and no added extras. Its U.K. heritage was overt and the design simple, clean and minimalistic, with wider aisles than many Lidl and Aldi stores.

Tesco planned to launch 10-15 Jack’s stores within the first six months, but the total never got beyond 13 stores over its three-and-a-half years of operation.

Let’s Talk About Jack’s

In fact, Tesco axed one of the first Jack’s store in Rawtenstall, East Lancashire just a year after opening – only to be replaced with a 40,000sq ft regular Tesco store. The retail giant said at the time that it was responding to customer demand, suggesting that locals had not warmed to its discount concept.

Tesco’s real problem was that Aldi and Lidl had already become very well established in the U.K., with their success driven through the aggregation of huge volumes across its European estate, enabling enormous buying power to deliver both quality and value. Jack’s could never match that buying power.

Despite the Jack’s closure in Rawtenstall in September 2019, Tesco maintained that it was “excited about plans to open further stores this year”, though store growth slowed to a snail’s pace, as all the while Tesco maintained “the reaction has been very positive” but limited trading information began to suggest disappointing performance.

In reality, while Jack’s model was designed to mirror the German discounters, Aldi and Lidl have both created reasons beyond low prices to drive loyalty, such as expanded homewares, and the cult following of their ever-changing central aisle concept.

Other than its U.K. sourcing, Jack’s arguably lacked a USP and as such represents more of a trial given that Tesco already has a proposition that ranges from basics to premium. Instead, Jack’s strategy ended up competing with the discounters on their own turf.

Tesco "Learns From" Jack’s

Putting a positive spin on it, Tesco said that Jack's had enabled it to bring in new customers from other supermarkets.

Jason Tarry, chief executive of Tesco U.K. and Ireland, said: "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. In turn, this has enabled us to consistently attract new customers to Tesco from our competitors over the last two years.”

The seven Jacks sites tobe closed are in Hull, St. Helen's, Walton, Castle Bromwich, Middlewich, Barnsley and Liverpool North. The sites to be converted to large Tesco stores are Chatteris, Immingham, Edgehill, Rubery, Sheffield and Wakefield.