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J Sainsbury plc Set To Take On Tesco PLC At Its Own Game

SBRYWhen my wife and I go shopping in Bangkok, we’ll often visit our local Tesco superstore — it’s actually branded Tesco Lotus since the UK’s biggest supermarket bought up the Thai chain.

It’s not just Tesco itself — there are other stores inside, including a pharmacy, a bank, a photo shop, a number of restaurants and coffee shops. In fact, we’ve even been to one that had an amusement corner for kids.

Tesco was moving into the same kind of thing in the UK, both by expanding its own services and in partnerships with others, but its current travails have put all that kind of thing on the back burner while it struggles with its basic business.

Jessops Photography Store

Meanwhile, Sainsbury (LSE: SBRY) (NASDAQOTH: JSAIY.US) is stealing a march on its larger rival, after announcing a tie-up with Jessops.

The deal, revealed on 8 October, heralds the roll-out of Jessops Photography Store outlets inside Sainsbury’s superstores. The first was scheduled for opening in Newport, South Wales, on the day of the announcement — so by the time you read this you might have already been one of its first customers. There should be a second opening in Waterlooville in December, followed by a Maidenhead store in January.

The move is part of of Jessops’ recovery plan after the iconic chain was rescued from receivership by Peter Jones of dragon fame — prior to this new development, the relaunched brand had 28 of its new format stores open across the UK.

Is it a good move?

It’s surely good for Jessops, with printing services, passport photos, accessories, batteries, memory cards and the like in big demand — and exactly the kind of products that sell well in similar overseas superstore locations. And the more open format of in-store stores lends itself to a friendlier, pop-in, kind of atmosphere. You’ll also be able to pick up of any Jessops’ photo products at the in-Sainsbury stores, with Mr Jones telling us that any Sainsbury’s customer who buys a camera will get a free tutorial.

What next?

It seems like a bit of a coup for Sainsbury, with Jessops’ goods and services making a nice match with its more upmarket image — though we’ve yet to see any effect on the share price, which is staying stubbornly down around 230p after losing 40% in the past 12 months.

But what next? Mobile phone stores selling pre-pay time, SIMs etc do well, and other electricals — perhaps there’s scope for Dixons Carphone to do a similar deal?

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares of Tesco. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.