So a top 10 from the Jack’s visit yesterday. Lots of press and indeed it’s major news(!)
There will be lots of press about price differentials and the like, but the reality is that with 2600 lines and 1700 of those being solely Jack’s – it makes a comparative difficult. Fair play to Tesco for putting together something that looks sustainable and is also a ‘great stab’ at getting it right.
Lots of headlines about price matching and otherwise, it’s clear that Tesco will follow the market and that means both Aldi, and Lidl. The intriguing thing about lower prices in Jack’s is that the ranges do not cross over, however the introduction of Tesco ‘exclusive brands’ has bridged this gap somewhat in the main stores… Express charge different prices also let’s not forget.
2. The Customer will decide
This remains true of any concept or store, but they really will in this case. The main element is the slight differential in price, the customer will decide if it’s all about price, or indeed, there are other factors too.
3. British +
8/10 products are British and those that are not are mainly due to the fact that provenance means they should come from elsewhere (IE Pasta has ‘imported by’ Jack’s on the label) or it’s impossible to do so – IE Bananas. The rest is British and there was a point made about it being British, not just merely processed, or finished in the UK.
The product range is some 2600 strong, with 1700 making up the own label, 800 are branded items with the other 100 (I believe) going within the larger Booker space and also within the special buys of which there are a number of bins with products that rotate every 4 weeks. Branded items seem high but the single confectionery (Cadbury’s) makes up some of this number alongside the lightbulbs and the like.
5. Jack’s own label isn’t everywhere
The Jack’s brand is the primary own label and exists in all food categories, alongside any branded choice as applicable. However in Alcohol, there is no sign of the Jack’s brand, not only does it sidestep a potential legal challenge from Jack Daniels, it also enables the chain to showcase ‘house’ Wines and develop the category easily. Brands are also noted in boxed confectionery / gifting (who gifts Aldi products e.g.?) and also Health/Beauty features a sub brand across the range in this category also.
6. Costs are fully thought through
Chatteris isn’t a typical store as it’s a former Tesco that never was so it has the timber structure and the high walls that we know from that time, therefore the refit would have been different to one that an old Tesco Metro experiences for example. The store and model has been built from the ground up, so every element and aspect is considered.. Freezers for example are Iceland style units that don’t require pipes/plant etc installing thus saves on cost.
7. Good, Better, Best
This doesn’t exist in Jack’s. We did think that the Exclusive brands in Tesco, certainly Farm brands may have appeared however there is no cross over between the two brands in terms of product ranges (bar brands). The mid tier is the only tier that appears and even premium doesn’t exist which is a minor surprise given the success Aldi and Lidl have had in this arena. That said, there has been some thought that both discounters are ‘breaking’ their model by adding so many products, particularly in Fresh Foods.
8. Wider competitors?
The talk is all about Aldi and Lidl as you would expect and the thorny subject of cannibalisation. However the trial of 10-15 stores is designed to test numerous areas and demographics alongside sites, be it new build, existing stores or mothballed sites such as Chatteris. It remains clear that once the model works and can be proven, there is every chance Tesco could use Jack’s in the same way that Aldi, or Lidl would and just sit one at the bottom / next to a Sainsbury’s.
Always a consideration and Dave Lewis said he’d rather cannibalise himself than have others do it. We know Aldi and Lidl do take sales when they open a store nearby and increasingly refits and activity is planned to try and mitigate any impact. Therefore the test is when opening next to, or near a Tesco, that is being hurt by Aldi, or Lidl. Can the sales via Jack’s offset any losses that the larger store suffers (for example)? Or does the larger store generally trade ‘ok’ due to the secondary footfall from Jack’s customers?
10. A bold move(?)
£25m is the initial bill for Jack’s and whilst it seems a lot, it is a drop in the ocean for Tesco. Not only that, but if you consider that 2011/2012 saw Phillip Clarke, and Tesco spend around £25m on Blinkbox media platform, an E-books platform and also an internet radio station part owned by Peter Gabriel.
Jack’s looks pretty good value, all considered. Lots more to see, particularly as they open more stores (2 per fortnight over the coming weeks) and indeed, the stores open and start trading!
Grocery Insight have released a full report on Jack’s featuring store imagery and our thoughts in wider detail on the store format and other bits and pieces. Further details will be released shortly. Please get in touch if you have any further questions.