Tesco launches £1 aisles to compete with Poundland

Tesco is launching a massive counter-offensive against pound shop stores as it battles to stem the loss of customers to budget outlets.

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.

A range of products will be sold for as little as 50p, including items such as health products, kitchen tissues, washing-up liquid, pet food and detergents.

The Tesco launch highlights just how severely the success of the pound shops is hitting the profits of established supermarket giants in Britain.

In recent years the no-frills budget shops have become a dominant force in UK retailing, with cash-strapped shoppers flocking to them on a regular basis.

Poundland was founded in 1990 and has 450 stores countrywide, while Poundworld launched in 2004 and has 200 stores. In addition, 99p Stores has more than 200 outlets.

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.

But one supplier told The Grocer: ‘Tesco are chasing their own shadow at the moment and this could just end with them just creating even more redundant space. ‘

And Steve Dresser from Grocery Insight analysts said: ‘Tesco had to do something about the likes of Poundland but I think shoppers would rather find deals through the normal course of their shop than go down a couple of separate aisles.’

Source : Sean Poulter - Daily Mail
www.dailymail.co.uk/news/article-2620552/Tesco-launches-pound-zones-bid-compete-rise-budget-supermarkets.html