Jack’s retail lacks detail

John Lowery asks ex-Lidl boss Ronny Gottschlich to cast his forensic eye over Tesco’s new discount business as the pair take a trip to the Chatteris store. Lots of tutting ensues.

Last week I made a trip up to Jack’s in Chatteris with Ronny Gottschlich. I wanted to visit the store after all the hoo-ha of the launch had died down. And I wanted to visit it with someone who knows a thing or two about hard-discount retailing. (Before setting up the Heunadel retail consultancy, Ronny was CEO of Lidl in the UK for 6 years; during three of which I’d been the TBWA planner working on the account; store visits were both regular and exacting.)

What follows is but a fraction of the observations made during the course of our visit.

On entering the store, we were met by a bright and airy atmosphere.

The staff were attentive and helpful. And the efficiencies of the house branding strategy were immediately apparent. But all of these niceties come burdened with their own problems, as we’ll reveal later.

In the meantime, I had a different problem. Jack’s Union Jacks are plastered everywhere. It feels like Jack’s is still symbolically fighting WWII but, being accompanied by a German, I didn’t mention the war.

What I did mention was that, just like Lidl, the bakery is at the front of the store, giving off a pleasing waft of fresh bread. It was at that point, however, that Ronny’s laser-like eye began burning into Jack’s inefficiencies.

Hundreds (if not thousands) of iced doughnuts were on display. (How many iced doughnuts can the population of Chatteris eat?) Meanwhile, chocolate and plain variants were both out-of-stock.

Indeed, out-of-stock was a recurring theme. There was an entire fridge intended for ready-meals standing empty. “What’s going on there?” I asked Ronny, “I have no idea” he replied “but the fridge is on. They’re wasting electricity.”

There’s another place they’re wasting electricity. Heating and lighting a store that is about 15 meters high. “Are they expecting giants?” asked Ronny. “If they do come shopping, can’t they wear hats?”

You see, Lidl doesn’t just think in square meters, that’s soooo Big Four. Lidl thinks in cubic meters. How can it make the most of all the space available?

Lidl calculates the size of its fixtures and fittings in a way that boggles your mind. The fresh meat fridges in Lidl are all of a standard height and depth. A height that allows the shopper to, just about, reach the meat on the top shelf. In Jack’s the top shelf was only 1.5m high. “Are they expecting dwarves?” asked Ronny. “If they do come shopping, can’t they give them a leg-up?”

As we reached the ketchup fixture, Ronny’s head began to shake despairingly. Two sizes of Jack’s ketchup bottle – 550g and 990g – were on sale, the former at 45p. Lidl only has one SKU – 565g. It’s 45p. Perhaps the existence of their second SKU explains why Jack’s is more expensive per 100gs.

The use of a Jack’s house-design was evident across almost all categories. But, “that means they can’t get as close to mimicking the brands that they’re trying to gain sales from”, noted Ronny.

We moved on and Ronny pushed back some of the shelf-ready packaging (SRP). I heard the sound of air being sucked through his teeth. He removed a small but finely graded ruler from his pocket (did I mention he’s German?) and pointed out that the shelf was 94mm too deep for the boxes. All that wasted metal, all that wasted space. Lidl buys its shelving to a standard depth and then specifies the sizes of its SRP to ensure that it fits to within five microns.

Lidl also buys SRP that is, as its name suggests, shelf-ready. We watched a member of the Jack’s team attempt to remove the lid of the packing for some cooked ham. The perforations were insufficiently deep to make the removal a simple process. There weren’t any on one side of the box. It was like watching a frustrated two year-old attempt to open its Christmas present. The process of getting it on to the shelf took, according to Ronny’s stop-watch (did I mention he’s German?), 11.2 seconds. In Lidl, it would take a maximum of 5.3.

Perhaps that lack of shelf-readiness explained why so much of the stock was not in its SRP. All around the store you could see that individual items had been removed and placed on the shelf, with exponential cost implications. Why did Jack’s pay for the SRP when it’s not using it? And imagine the staff costs involved in removing all those packs and stacking them individually. But there was another issue…

When I first went on a Lidl store visit with Ronny some five years ago, I stepped up to a fixture and turned around a bottle of bleach so that the label was facing the customer.

“Don’t do that. You’ll get fired,” barked Ronny. Trembling somewhat I asked why. “Because it’s a waste of man-hours. The shoppers know it’s bleach. You could be doing something else… like manning the tills or, in your case John, writing some decent adverts.” (The trembling intensified.)

It was evident throughout the Jack’s store visit that the employees had been wasting hours by turning around the packs to face the customer.

Ronny has ways of making people talk. Since you ask, it’s charm not scopolamine. And he managed to extract two crucial facts during the course of our visit.

The first was this: four or five of the personnel at the store previously worked for the mothership. “There you go,” he said, “They’ve learned to turn the packs round at Tesco. It will take months to knock that kind of behaviour out of them.”

The second was a real bombshell: after a couple more conversations and a little mental arithmetic, Ronny had come to the conclusion that Jack’s staff costs as a proportion of store revenue are such that it is paying 60% more than Lidl. No wonder, when they have people wrestling with cardboard boxes and turning around bottles of cider that don’t need turning around.

As we exited the store, Ronny pointed to the trollies: “Two different sizes. Why? It increases costs.”

We got into our German car, rented from a German hire company, Ronny effortlessly typed our destination into the German Sat Nav, and then he made his final remark: “Of course we haven’t seen the supply chain but it looks like they don’t have the efficient German machine running behind the scenes. That store is losing money.”

I dropped Ronny at Stansted, from where he was taking a budget airline to… well, by now, you know where.

As I drove back to London my first thought on hearing news of the Jack’s launch resurfaced… If it’s successful, it will surely eat Tesco.

There are five Tesco stores within 10 miles of Chatteris. There are two Aldi stores and one Lidl. Given than Jack’s seems to be a costly facsimile of Lidl and Aldi, who do you think it will hurt most if it succeeds?

When I got home I popped into my local store to buy dinner. The fresh meat and fish offering looked like this:

It’s a regular occurrence at my Metro, where one or more of their fridges is out of action on a regular basis.

Perhaps Tesco is already eating itself, as resources are diverted to Jack’s and away from its own retail detail.

John Lowery is a marketing consultant who has worked both agency and client side.