Tesco (LON:TSCO) is challenging the discount supermarket giants, Aldi and Lidl, with the launch of Jack’s.
Owned by Tesco, Jack’s is a new cut-price chain that offers customers cheaper alternatives. Jack’s will offer roughly 2,600 lines – the majority being own brand. Compared to Tesco’s tens of thousands of lines in its regular supermarkets, this figure is much smaller.
The first two Jack’s stores will open their doors tomorrow in Chatteris, Cambridgeshire, and Immingham, Lincolnshire.
These were previous Tesco sites that were shut down four years earlier.
The project is set to open up to 15 stores in the next 12 months. It aims to keep prices at a consistent low by reducing operating costs.
Fundamentally, Jack’s will face competition from Aldi and Lidl. The German giants have become increasingly popular in the UK in the recent years. By offering low-cost alternatives to regular brands, Lidl and Aldi have experienced incredible growth in a short period of time. In fact, Aldi has over 10,000 stores in 20 countries with an estimated combined turnover of over €50 billion.
Previously, we reported that the premium supermarket ‘Waitrose & Partners’ was experiencing a slump in its profits. Indeed, Lidl and Aldi prove that low-cost may be the way forward. In fact, the two German discounters have nearly doubled their market share to 13.1% in the last five years.
With Tesco, Sainsbury’s, Asda and Morrisons forced to cut costs and close stores, competition from discounters is fierce.
This growing competition has encouraged Sainsbury’s and Asda to merge in an attempt to reduce costs. However, this has prompted an investigation into the £12bn deal by the Competitions and Markets Authority.
At 12:12 BST today, Tesco shares were trading at -0.043%.
Shares in Sainsbury’s (LON:SBRY) are currently -0.65%.
Asda owner Walmart (NYSE:WMT) shares are currently +0.64% as of 11.48AM (GMT).
