Tesco recently opened a new line of discount stores called Jack’s. Take a quick look at their list of stores and there’s one thing you might notice: they’re all surprisingly close to an Aldi. And there you have the reason for their new brand of stores: extreme competition. Historically, Tesco suffered due to competition from stores like Aldi and Lidl who offer a smaller range of products at a lower price, so will this new venture be successful? Or could it actually do their brand more harm than good?
Aldi knows their stuff.
Aldi’s business model has been around for a long, long time. Its roots go back to 1913, when a small shop run by the family of one of the Aldi founders had this exact same business model. They’ve been doing what they do for years and they’re good at it. The last time a big supermarket chain tried to take on Aldi it was literally annihilated- and that was global giant Walmart. Aldi’s simple approach has been honed over decades and the brand has always had a simple approach. Tesco supermarkets are really great at what they do but trying to compete with Aldi in a game that Aldi created sounds like an almost impossible task.
It’s Tesco…but it’s not REALLY Tesco.
If you look at the stores, Tesco and Aldi don’t have much in common. Regular Tesco stores are usually large (obviously not including Tesco Metro and other smaller branches), there’s a big focus on fresh produce and there’s a tonne of advertising for various brands and products, especially offers for big-brand products. Aldi stores are small, notorious for discontinuing anything that doesn’t sell rather than making offers on it, and, while there is fresh produce available, it’s not a sales priority and the only in-store advertising they do is in a small leaflet showing what to expect for sale the following week.
Tesco has a great brand, and they’ve spent almost 100 years perfecting it. They’re one of the most recognisable supermarkets in the UK and they have a great community feel, but they’re not being true to themselves by going down the route of Jack’s. Tesco’s core purpose is ‘serving customers a little better every day’ and they focus on a community environment within their stores where Tesco employees are always there to help. In trying to compete with Aldi, there’s a chance they might have to abandon that mindset and trial a more simplistic and direct approach that puts their core brand offering on the back burner. All of that will take a huge amount of effort, which will be directed away from their core offering, potentially harming the brand long-term.
All in or all out?
For something like this to work, Tesco must, as a brand, dare to go all-in. At the moment they don’t appear to be doing that, likely because there is a lot of risk involved. Over the next twelve months, there are 10-15 Jack’s stores opening across the UK. Aldi, on the other hand, aims to have over 1,000 by 2022. Sure, Aldi will lose some customers to Jack’s but with such a small number of stores, the loss won’t be big enough to worry them. What is likely to happen is that Tesco will lose some customers to their own Jack’s stores. That might be a way of mitigating some risk, but with more Aldi stores available across the country, the risk is only being mitigated in some areas. A real leap of faith would be needed to truly compete with Aldi.
It’s not all bad…
There’s always going to be a place for supermarket chains like Tesco. Aldi is a great shop with a fantastic business model, but there are things that you just can’t get in their stores, so you go to Tesco. In addition to this, brand loyalty can’t be ignored either. It’s not a foolproof factor in consumer’s choices, but it does form a large and important part of our shopping choices. Tesco’s bigger problem is that not only is it getting squeezed by the discount stores like Aldi and Lidl, but the Walmart/Sainsbury’s merger is now underway, potentially expanding its main competitor in a big way. Tesco is stuck between a rock and a hard place, but as long as they don’t ignore their own strengths, the battle for consumers’ loyalty is still anyone’s game.
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