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Case Study: Trader Joe’s

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10-18 Under the concept of customer value-based pricing, explain Trader Joe’s success.

First, they understand their customers. Instead of offering everything grocery shoppers need,

Trader Joe's draws them in with new items. This means that TJ's are unlikely to be a consumer's

primary source of supply. Rather, buyers are occasional visitors looking for something special, or

just wanting to take a look to see what's new for sale. To create the desired atmosphere, stores

have more than 2,000 exclusive private label items in stock, 85% of the total supply of a store,

under names like Trader Joe and Baker Josef. The company offers only about 10% of the number

of products in a full-service supermarket and restricts the assortment to interesting and unusual

items such as, Chili Lime Chicken Burgers, Cookie Butter, and corn and chili salsa. They keep

their costs down with cheap space rentals, bulk purchases, and large supplier negotiations all to

achieve attractive prices. Also, they hire employees with an open personality and a good sense of

humor who are committed to making each customer’s shopping experience fun. (Lutz, 2014)

10-19 Does Trader Joe’s employ good-value pricing or value-added pricing? Explain

Trader Joe’s prices, where the “unique offers” do not have to do precisely with

promotions. Even Trader Joe’s has no discounts, coupons, or gift cards on its website. Its bet is

focused on “offering the best prices of the day, every day”. This philosophy allows them to keep

their supply healthy and of good quality while avoiding aggressive consumerism of fight

between customers for the best discounts. Also, they have strategies of discontinuing products

when they are not in season or investing little in packaging to focus on food, the chain keeps its

promise of low prices to customers. Their impact in the communities extends to the hiring of

local suppliers and workers to guarantee the supply of fresh products and their intention to

improve the quality of life in the surroundings of their stores, which are designed according to

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the place where they are located. Trader Joe’s offers value-added pricing because the offer

products that are not available in any other stores, just in Trader joe’s and this is because of their

variety of suppliers.

10-20 Does Trader Joe’s pricing strategy truly differentiate it from the competition?

Trader Joe’s focuses on bringing only products that they can buy and sell at a surprising

price, even if this means that items change from week to week. This means that the company

must interact with a larger group of suppliers, some of which to close business at once. The

quantity is also different each time, rather than making routine purchases to restock the

inventory, the retailer often purchases everything the supplier has in inventory in a single batch.

Trader Joe’s is not the only successful retailer in select groceries, Whole Foods a chain of 165

stores, and Wild Oats with more than 100 stores, they are two prominent participants in a

somewhat different category called natural and organic foods. Unlike competitors like Walmart,

Trader Joe’s can offer competitive prices without sacrificing product quality. Trader Joe

identifies the best products and transforms them into own brands, which allows them to have the

best purchase prices with a powerful relationship with the suppliers. This approach of being a

grocery retailer with its brand of products minimizes costs and keeps prices low, allowing them

to reinvest in customer service, product quality, and in-store experience.

10-21. Is Trader Joe’s pricing strategy sustainable? Explain.

Trader Joe’s pricing strategy is sustainable because one of the main reasons the chain can

offer lower prices is because many of the products are made in-house or are exclusive to Trader

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Joe’s locations. Simplifying internal processes allow for lower production costs and savings are

passed to consumers.

10-22 What changes – if any – would you recommend that Trader Joe’s make?

A recommendation for Trader Joe’s would be to also focus on technology, because

having Whole Food as one of the main competitors, it is having Amazon as competitors which

lead in technology, I would recommend improving their online shopping.

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References

- Kotler, P. & Armstrong, G. (2018) Principles of Marketing.

- Lutz, A. (2014, October 7). Business Insider. Business Insider.

https://www.businessinsider.com/trader-joes-sales-strategy-2014-10

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