Tesco discount store plan could be as disastrous as Sainsbury’s revival of Netto, City analysts warn

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A rumoured plan by Tesco, the supermarket giant, to create a low-cost store to rival Aldi and Lidl could prove as disastrous as Sainsbury’s attempt to revive Netto, the ditched discounter brand, City analysts have warned.

An entry into the low-cost supermarket war would be “very late in the day” but Tesco could use the Booker deal to spearhead its attempt to fend off the German discounters, retail expert Nick Bubb said.

“The obvious comparison is with the failure of the recent Sainsbury’s joint venture with Netto, as the key issue is how to scale such a business quickly, to achieve critical mass in marketing and physical presence,” he warned.

Tesco is thought to be readying a plan to create a separate cheaper brand and offer a stripped down product selection to rival Aldi and Lidl, according to The Sunday Times. Clive Black of Shore Capital believes that Tesco would have to make a major push to justify the move.

“To do it in a way that is complementary to the core business so that people don’t ask the question ‘this is exactly the same product, why can’t it be cheaper at the Tesco store’ is a big issue,” he said.

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