Savvy takes a first look at Jack’s

Tesco’s much-awaited format innovation Jack’s opens in two stores to the public today, following a launch event yesterday at which Savvy had a preview of the retailer’s Chatteris store and a briefing from Tesco’s management team.

Jack’s is a discount chain which Tesco is trialling as its latest attempt to take on discounters Aldi and Lidl at their own game. Following the initial stores in Chatteris and Immingham, the grocer has laid out plans to open 10 to 15 shops over the next 12 months. Five will be rebranded existing Tesco stores, while eight will be made up of mothballed sites and other property from within the Tesco’s portfolio.

The store’s look and feel is similar to some of the German discounters’. It is bright and spacious. Colleagues dress in their own clothes and a Jack’s apron, giving an added a feeling of informality. ‘Fresh Five’ signage in the food and veg aisle and the prominence of WIGIG promotions across food and non-food have a hint of the grocer’s German rivals about them. Jack’s describes its personality as ‘no fuss, no frills simple and warm with a twinkle where possible’.

With a total of 2,600 SKUs stocked, the range is substantially smaller than that found at a Tesco and is more comparable to an Aldi or Lidl. There are 160 GM lines and some 200 promotions. 1,800 of the overall SKU count are Jack’s own brand, which seeks to provide excellent value for money and has a strong emphasis on Britishness through its mantra ‘we’re always British when we can be’. 100% of meat, crisps, sweets and cereal is British and four out of five of all Jack’s products are grown, reared or made in Britain – a message that is communicated loud and clear on packaging, shelf edge and front and back of store. Furthermore, on fresh product where a British variant is not available, packaging is marked ‘imported’. Savvy knows from its own research that provenance resonates well with shoppers.

 

Local produce is an important part of the offer, with a range of local cheeses and soups a couple of the highlights. We also liked local community activity.

Compared to Aldi and Lidl, the presence of brands is striking (700 lines), mainly across ambient categories and the store includes a central aisle of branded deals. Jack’s will stock branded products where product quality cannot be matched or where the rate of sale of the branded item is at least five times the own label alternative. For brands that have traditionally struggled to find a way into the discounter channel, Jack’s may offer an opportunity. That said, the retailer’s ambition to maintain stable pricing and the lack of brand activation mean in-store shopper marketing is essentially limited to on-pack promotions.

Pricing at Jack’s is keen, with own label products setting out to be the ‘cheapest in town’. Our quick audit against Aldi supported the claim. Of course low prices will be a key draw for shoppers, but we expect Tesco will experience teething problems here. First, we found that Marmite costing £2.40 at Jack’s was available for £2 on Tesco.com as the product was on promotion. Inconsistencies of this type have potential to rock shopper confidence. Second, should Tesco rollout the format, it is likely that Aldi and Lidl will respond with lower prices, potentially sparking a price war in the discount channel. Finally, while Tesco was eager to highlight the lower cost to serve at Jack’s, the reality is for Tesco that Jack’s adds further complexity to the business, through a new range of products, format specific operational processes, different in-store materials and the risk of cannibalising existing store sales.

Efficiency has been built into the operating model at Jack’s from day one. Stores boast wider aisles to allow day time replenishment, 90% of ambient lines are delivered in shelf ready packaging and 29 best selling lines are on pallets. There are three ways to pay – checkout, self-serve and a payment app that allows shoppers to scan products using their smartphone, enabling a quicker checkout experience.

Overall we were impressed with Jack’s. Razor sharp pricing, an authoritative range of compelling own label products, a strong British theme and the availability of big brands are ingredients of an attractive proposition for shoppers. It also has a lot of potential to reinvigorate some of the many stores in the Tesco main store estate that are underperforming. Of course, for the opening, the store was seen in its best possible light and a visit on a busy Saturday afternoon will be the acid test both operationally and visually. We also think Tesco will need to tread carefully with its pricing, especially with brands where a direct comparison can be made to the main chain.

A cautious plan to open 10 to 15 stores in 12 months will not be enough to scare Aldi and Lidl on its own, but they’ll be monitoring developments closely. Tesco remains the UK’s largest retailer by some margin, is currently on a roll, has its mojo back and, from what we’ve seen, has developed a store concept with much potential.