Netto takes aim at discounters and supermarkets with UK relaunch

Its first store launches today in Leeds’ Moor Allerton Retail Park, bringing a “Scandinavian twist” to discount shopping.

New-look Netto is launching as a joint venture between parent company Dansk Supermarked and Sainsbury’s, four years after the company sold its 193 stores to Asda for £778m.

Per Bank, chief executive and managing director at Dansk Supermarked, told The Yorkshire Post that Netto aims to raise standards in discount retailing.

He said: “We want to add something different to the discount market. It’s a new discounter, it’s a new-look Netto and it’s a Netto with a Scandinavian twist developed closely together with Brits and Danes.”

Dansk Supermarked and Sainsbury’s have invested £12.5m in the venture, which will trial 15 stores around the North before the end of 2015. Both companies expect to make losses of between £5m and £10m by the end of March.

The rise of discount retailing, demonstrated by the increasing success of Aldi and Lidl, and the partnership with Sainsbury’s make it the “perfect time” to relaunch Netto, Mr Bank said.

He said: ““Retail is becoming more and more competitive and the discount market in the UK has taken off, it’s really moving. Still, it’s not too late.

“In Denmark we have 1,400 discount stores and we’re a tenth of the size of the UK.

“Together with Sainsbury’s, there’s a great potential for a third player in the discount market.”

Thursday’s Moor Allerton launch will be followed by openings in Manchester, Sheffield and Ormskirk by mid-November. A Doncaster store will open later in the month, with an additional 10 in 2015. The stores will be based at a variety of locations, including retail parks. All stores will be located in the North, with a distribution centre in Scunthorpe.

Aldi and Lidl are estimated to be around 15 per cent cheaper than the Big Four supermarkets. Netto will compete head-to-head with Aldi and Lidl on price, but are not just targeting existing discount shoppers.

The relaunched brand will be “grabbing customers from all over the place”, Mr Bank said, including its business partner Sainsbury’s.

“We hope we’ll enlarge the number of customers that do shop discount,” he said. “We don’t differentiate between Sainsbury’s, Tesco, Asda, Co-op.”

Based on its global experience from existing operations in Denmark, Germany and Poland, Netto is also likely to take market share from “small corner stores that do not offer value for money”, Mr Bank said.

The partnership with Sainsbury’s has enabled Netto to tap its market knowledge, supplier contacts and property expertise.

Although Sainsbury’s has leant logistical and financial support to Netto’s relaunch, both companies will continue to operate independently with different management teams. The company decided to retain the Netto brand, despite the company’s previous exit for the UK and some criticisms about the standard of its previous stores, due to its familiarity.

“What you’ll experience in the store is completely different. We’ll be highly competitive and it’s our ambition to set new standards for discounters,” Mr Bank said. For the customer, it will be “easy to park, easy to shop, easy to pay”.

Fresh produce, including bakery, and the brand’s Scandinavian heritage are the foundations of Netto’s offering, which includes upwards of 2,000 products.

It has created its own brand ranges, including its basic Easy and luxury Premier lines, which currently have between 100 and 150 products each, with more in development. In-house labels account for between 60 and 70 per cent of its stock. Around 10 per cent is established brands, with the remainder “tertiary” brands that may be sold elsewhere but are not staples of the UK market.

Morten Moberg Nielsen, head of Netto UK, said the business will deliver a “simply but high-quality” experience that will set it apart from other discounters.

He added: “Lidl has done a very good job, I do believe we can do better.”

Mr Bank added Netto is “respectful” of the British market. “It’s tough, but we want to surprise,” he said.