After Tesco revealed plans to launch a discount chain, can it compete with Aldi and Lidl?
Yes – Tim Smith is head of retail at Konica Minolta Marketing Services.
One of Tesco’s strengths is having the confidence to observe and learn from the work of other retailers.
After investing in the customer journey and looking at the frequency of top-up shopping during the week, Tesco’s share price has risen by almost 50 per cent in the past year.
The success of its own brands speaks for itself, and its relationship with newly acquired Booker will only make this offer more compelling.
This hasn’t stopped the supermarket giant from losing shoppers to discounters in recent years. But developing a rival offering will win some of those customers back, even if it risks cannibalising existing revenue.
To make a success of this, it is crucial that what Tesco offers through its discount stores is differentiated from Aldi and Lidl.
The retailer must pay close attention to store design, produce, and technology. It must also remember that shoppers choose to visit the German discounters for reasons beyond price.
No – Bryan Roberts is global insights director at TCC Global.
There’s certainly a lot to learn from Aldi and Lidl. But Tesco should not take a leaf straight out of their book.
The retailer already offers popular ranges like Hearty Food Co that rival discounters on value, and its partnership with Booker means that prices it can offer will be even more competitive.
But our research has shown that Aldi and Lidl both have loyal customers, who don’t just shop there for the price, so simply copying their model won’t cut the mustard. It will also be a big challenge to escape the shadow of Tesco’s existing business, and we’ve seen their past attempts at discounting fail, such as in the mid-80s under the Victor Value brand.
If Tesco puts some proper welly behind their discount offering, differentiating from the German retailers, investing in infrastructure, and store openings, it could stand a decent chance of success.
But if it doesn’t, its fate will be similar to Victor Value’s. And it’s likely it would end up harming Tesco’s existing brand.