The nation’s biggest retailer has begun opening heavily-promoted 'pound shop' areas within its stores in a bid to take on thriving Poundland and other low-cost chains. The new zones have so far been introduced to more than 60 Tesco stores, and the retailer plans to increase this figure to nearly 300 over the next few weeks.
Tesco Pound Shop buying manager Paul Bangs said it wanted to ensure shoppers had access to a ‘vastly improved range’ of discount products. He said in a letter to suppliers: ‘This is a project that Tesco is taking very seriously. As a new concept, implementation will be absolutely key to success.’
Mr Bangs also told trade magazine The Grocer that the retailer would launch new point-of-sale marketing materials including header boards, hanging banners and other signs to encourage people to visit the new areas of the shops. The magazine added that Tesco has previously attempted to take on pound shops.
A ‘pound shop’ strategy for food and non-food items was implemented in 2009, with an aisle in larger stores just for the lines. A £1 section was then rolled in about 50 stores in 2012.
Aldi’s sales growth has accelerated to 34 per cent a year, while takings through the tills at Lidl are rising by an impressive 17 per cent. The budget chains have made a concerted effort to target middle Britain shoppers who have seen prices rise faster than incomes for the last five years.
While the German chains open shops at the rate of one a week, Tesco continues to lose sales despite a £1billion turnaround plan. Its sales in the 12 weeks to April were down by 3 per cent on a year ago.
Last month it was revealed that Tesco's profits had fallen for the second year running as its rivals continue to eat into its market share, which is at a ten-year low. Britain's biggest supermarket posted a six per cent fall in its pre-tax profits to £3.3billion in the past 12 months, down from £3.45billion a year earlier.
Tesco is still by far the biggest UK supermarket with 28.6 per cent of market share, but this is down from 29.7 per cent a year ago.
