Tesco is planning to launch trials of its new discounter brand in stores previously mothballed by the company as it exited from the space race, according to The Times.
The newspaper claimed at the weekend that the supermarket giant had advanced proposals to use the remaining 26,500 sq ft of its property in Chatteris, Cambridgeshire, and at another site in Immingham, Lincolnshire, to launch its new rival to Aldi and Lidl.
The plans are said to be being spearheaded by Tesco retail director Lawrence Harvey, who it hired from Aldi two years ago. He is reported to have been given a team of “dozens of people” to launch the Tesco spin-off.
Experts said the idea of using part of its mothballed stores could be a good way for reducing the cost of launching a discount proposition without cannibalising existing operations. However, they also said huge barriers faced Tesco if it is to succeed in building enough scale to compete with Aldi and Lidl.
Tesco spent £22m developing the store in Chatteris, Cambridgeshire, which it got planning permission for in 2012. However, it was mothballed in 2015, one of 49 planned stores that were cancelled, alongside a further 43 existing outlets closed as Tesco boss Dave Lewis moved to slash excess space and reduce capital expenditure.
Tesco is understood to have held talks to sell the site to Asda but they broke down, according to property sources.
However, a 21,000 sq ft Poundstretcher opened earlier this month at the site, leaving space for what now looks set for its new entrant in the discount market.
The Times reports similar plans for another controversially mothballed site at Immingham, in Lincolnshire, which was also shelved by Tesco in 2015.
Tesco refused to comment on the report but the fact that it has given one of its most talented staff the job of heading up the project - alongside his background at Aldi - suggests it is taking the controversial move seriously.
Harvey was named among The Grocer’s Top New Talent for 2015, having been credited with delivering “great results” and a “huge improvement” in staff morale.
Tesco said he had “great personality, warmth and true values-led leadership” as well as “a sharp mind… is dynamic and engaging and cares passionately about his team and the business”.
However, experts said he would need all these qualities if he were to make the new concept a success.
Sainsbury’s July 2016 decision to pull the plug on its Netto venture, at a cost of tens of millions, is the most recent of many examples of how hard it has been for even the biggest supermarkets to build the sort of scale needed to compete with the discounters.
A source said: “It makes sense if Tesco is going to trial this by opening space at these mothballed sites, because it’s a cheaper way of doing it. But that doesn’t get round the fundamental issue of how they are going to build enough scale.
“Even for someone like Tesco, you have to have a discount brand which lives and breathes discounting from top to bottom.
“This looks like a brave move but I suspect one that is destined to fail.”
However, others have been more optimistic about Tesco’s chances.
“We would expect the banner to initially be made up from converting excess space in less affluent areas: Metros, One Stops and supermarkets,” said Bruno Monteyne, senior analyst at Bernstein. “We have consistently argued that new formats should be introduced to segment the proposition.”
Other sites speculated as possible locations include Kettering in Northamptonshire, where Tesco has put in a planning application for a new store beside an existing Tesco Extra.
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