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Further details emerge about Tesco’s discount store plans

| International retailers

Tesco’s plan to launch its own discount store format to help it win back customers from the discounters is being led by a former Aldi executive, with two stores previously mothballed by the group earmarked for initial trials.

Vague details about the surprise move were reported a couple of weeks.  However, an article by The Times over weekend provided some further insights, including the fact that the idea is being driven by Lawrence Harvey, a former Aldi executive, who has “dozens of people helping him to draw up a workable concept.”

Lawrence’s LinkedIn profile shows he has worked at Tesco since August 2012 and currently holds the position of Retail Director (UK Central Region).  He previously worked for nearly nine years for Aldi UK & Ireland, rising to the role of Operations Director (Midlands).

Harvey was named among trade magazine The Grocer’s Top New Talent for 2015.  Tesco described him at the time as “a sharp mind… is dynamic and engaging and cares passionately about his team and the business.”

Sources quoted by The Times said that Tesco has identified two locations – Immingham, in north east Lincolnshire, and Chatteris, in Cambridgeshire – where the first trials of the new format could take place. Both areas have large Tesco stores that were built but then mothballed in 2014 when the group decided to halt the development of a number of sites and close others in an effort to cut costs and reduce excess space in its property portfolio.

Tesco has subsequently secured planning permission to divide the Immingham unit into two, letting half to Home Bargains. The Chatteris store is also now partly occupied by Poundstretcher. The newspaper said that Tesco’s new discount fascia could occupy the remaining space at both sites.

Previous attempts by UK supermarkets to move into the discount sector have failed, with Sainsbury’s joint venture with Netto being the most recent example. Leading retail analyst Nick Bubb said earlier this month that Tesco’s plans could prove just as disastrous. “The key issue is how to scale such a business quickly to achieve critical mass in marketing and physical presence,” he warned.

However, it has been suggested that Tesco could decide to convert some of its bigger stores in the One Stop chain, as well as some Metro outlets in less affluent areas, to grow the format quickly if initial trials prove a success.  Opening trial stores in mothballed sites should also keep the costs down and give Tesco time to develop the offer.

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