Tesco in the UK is in the launch phase of a discount chain, ‘Jacks’ as a competitive response to the inroads of German discounters Aldi and Lidl.
I can only assume Coles and Woolies management are watching with interest, as they have yet to find a way to combat Aldi in their backyard, and in the absence of a better idea might just copy it, almost as something to do.
Second ranked Sainsbury’s strategy has been different. They are ‘merging’ with Wal-Marts Asda chain in a deal reported to be worth 7.3 billion pounds. This deal would take them past Tesco as the UK’s biggest retailer, and so needs regulatory approval. Wal-Mart bought Asda in 1999, believing their discount model that made them the biggest retailer in the world by a country mile, would work in the UK. They have clearly failed in the face of more effective discounters from Germany. Meanwhile, both Aldi and Lidl are rummaging around in Wal-Marts US backyard.
Perhaps Wal Mart have recognised the threat to their dominance is coming from more than Amazon and are hunkering down for a fight?
As this all unfolds, I suspect history will reveal that Tesco has made a huge blue.
They are setting out to make Jacks clearly part of the ‘Tesco family’ according to the blurb sprouted by CEO David Lewis at the opening of the first Jacks, just down the road from an Aldi site. At the same time, they are committed to sourcing ‘British first’. This is a mix of business models that must make the Aldi executives giggle with joy, as all it will do is drain money from the Tesco coffers while highlighting Aldi’s positioning as the cheapest around. Setting out to ‘out-Aldi’ Aldi will be a doomed strategy, particularly as they have already compromised it by being overtly British first. This approach may appeal to some, but those who shop at Aldi do so for the price, first, second and last, and will not care about ‘Britishness’, so all Tesco will be doing is damaging their own positioning, and dropping bundles of cash.
From a distance, I hope those few in Coles and Woolies who have been around for a while will whisper some common sense into the ears of their bosses.
‘Anyone remember Jack the slasher, Franklins, Bi-Low, and Jewel’ ?
All discounters, all now gone.
