Trader Joe's Case Study

Trader Joe’s is a major food retailer who has developed quite the name for themselves. It has well over 350 stores in over 32 states and is expected to continually grow over the next few years (Bond, 2012). For over 50 years, Trader Joe’s has been providing quality customer services, products and a unique shopping experience for its customers. They have come a very long way from when they first officially opened their doors. Trader Joe’s started when its founder Joe Coulombe wanted to find a way to differentiate his 7-Eleven stores (Schermerhorn, Osborn, Uhl-Bien & Hunt, 2012). In the food retailer industry, Trader Joe’s has developed a process that works well and

Trader Joe’s success is attributed to their sustained focus on core business. The rendering of a unique and unequivocal experience, the provision of sound financing solutions (to include their Aldi acquisition), store operations, new leadership implementation, the management of their expansion, as well as addressing their need for change at the right time.

One of Trader Joe’s biggest advantages is in their target market. They have found the niche that appreciates higher quality foods but is on a tight budget and Trader Joe’s has managed to provide high quality food that is at a great price. So you end up with the individuals who are health conscious and in college or recently graduated who value a great deal. Trader Joe’s has realized that and has capitalized on this fact by opening in locations that are easily accessible to both students

Trader Joe’s chief executives have been careful in their expanding of the brand to more geographic locations, and they must continue to seek out their target market of “intelligent, educated, inquisitive individuals” and settle around them.

Thirdly, Trader Joe’s stores are small and located in non-prime locations, which holds fixed operating costs at bay. Furthermore, the company is able to generate the industry’s highest sales per square feet in its small sized stores. In an effort to diversify from its competitors, Trader Joe’s also relies on a non-traditional marketing strategy. Completely neglecting conventional marketing techniques like commercials or promotional offers, the company focuses on unique and store specific in-store marketing with its newsletter and the occasional radio ad being its major means of communication with its customers. The Trader Joe’s brand with its vast fan base is naturally another part of the company’s competitive advantage.

One of Trader Joe’s competitive assets is their business model. They open small stores that give their customers a neighborhood feel. Analysts have found that the chain sells almost twice as much per square foot as its main competitor, Whole Foods (INVESTPOEDIA, 2016). This unique strategy allows consumers to view and choose more products in a given area, therefore making them more likely to find what they are searching for. This strategy is sustainable if Trader Joe’s continues to operate in this manner.

Grocery shopping is more diversified and evolved than ever before. Individuals across the nation have access to everything from exotic products to unique delivery services. Often, specialty stores have limited locations whereas specialty services have a limited reach. However, two retailers have expanded to hundreds of locations while adhering to unexpected market positioning for previously untargeted market segments. Whole Foods Market and Trader Joe’s have become household names while also innovating beyond regional and national traditional chains. Despite comparable size in

They only stock about 4,000 SKUs in their small locations; this is a business strategy resulting in the retailer selling an estimated $1,750 in merchandise per square foot, more than double Whole Foods’ (Kowitt). Additionally, produce is priced per unit at Trader Joe’s, while Whole Foods sells by the pound. Both Whole Foods and Trader Joe’s “organic” options generally run about $1-2 more expensive than their “regular,” non-organic products. Whole Foods also offers more national brands, which are pricier than private label brands.

Market Force has ranked Trader Joe’s as #3 for America’s favorite grocery stores (Vasel, 2016). Trader Joe’s is all about customer service, happy employees and offering high quality products at low prices. Their strategy is to compete differently than their rivals, and by offering products that the others can’t. This is reflected in their mission statement below:

3. What are the main threats to Trader Joe’s competitive advantage? Is their advantage sustainable?

Trader Joe’s success with their employee’s is based on hiring individuals who are “ambitious and adventurous, enjoy smiling and have a strong sense of values” (Uhl-Bien, Schermerhorn Jr., & Osborn, 2013, p. 98). Trader Joe’s employees’ exhibit job satisfaction and higher performance because they are compensated very well in their earnings, benefits and professional growth opportunities. Employees’ that are based in California stores “can earn almost 20 percent

Current news report describes Trader Joe’s as a “trendy grocery store with cult like following,” Similar new report that Trader Joe’s are opening up a store in Florida. I do believe Trader Joe’s is a management benchment

Trader Joe’s occupies a niche position in the grocery market by providing natural, organic and eclectic selection of wines, frozen food, prepared food and groceries at everyday low prices. They have a small area format with limited products which has put them in the top rank for sales per square feet.

This is because they constantly keep their shelf stock moving. This is shown by the SKU (stock keeping units) of 3500 compared to the traditional supermarket, which has an SKU of 55,000 (Kowitt, 2010). Trader Joe’s keeps their SKU much lower which enables them to constantly offer high numbers of new products. Therefore brand loyalty will not be as high for Trader Joe’s. Trader Joe’s keeps their costs per unit down achieving exceptional economies of scale. All of these barriers to enter the market make it difficult for new entrants trying to enter the market.

Trader Joe’s operates over 340 stores in 9 states were they “buy direct from suppliers whenever possible, bargain hard to get the best prices and then pass the savings on to the customer” (Trader Joe’s, 2013, para. 4). Whole Food’s Market is the “world’s leader in natural and organic foods, with more than 360 stores in North America and the United Kingdom” (Whole Food, 2013, para 2). Trader Joe’s and Whole Food’s Market have managed to take original ideas and spread them throughout the nation to many different customers. Although they differ not only in the technique in which they decide to bring products to their customers but also in term of inventory management and supply chain organization. These two companies have become so successful in my opinion, not by what they differ in but what they have most in common, which is their commitment to their loyal customers, employees and undeniable quality in their products they sell. Through their loyalty to their customers and employees in addition to their irreplaceable value