Not yer average Joe

Dhairav Dalal
MOB9525-01
Summary
 Win at the grocery game by innovation in:
 Marketing
 Business model
 Product
 Build a sustainable business through investments in:
 Resources
 Processes
 Values
 Highest per sq ft revenue amongst supermarkets
 2nd best supermarket chain in the United States
Not a great start
 Started in 1958 by Joe Coulombe as Pronto Markets
 Competed with convenience stores like 7-Eleven
 Change in strategy
 Began to differentiate by offering “the world’s largest
selection of alcoholic beverages”1
 Started developing private label around this time
 First Trader Joe’s opened in 1966
 Store selection oriented towards Americans who wanted
variety of foods from around the world

1 Joe discovered a high correlation between years of education and alcoholic consumption and chose to target the relatively small group of people with
college degrees
http://www.novusvinum.com/features/trader_joes.html
 Innovation at Trader Joe’s
Experiential Marketing
Innovation Innovation

Process Business Model

Innovation Innovation

Product Structural
Innovation Innovation
Revenue Growth

Application
Innovation

Disruptive
Innovation

Time
Source: Jay Rao
Marketing innovation
 A different value proposition:
 “For the middle income educated consumer who likes variety of
foods from around the world, Trader Joe’s offers the best in
quality gourmet cuisines at a low, affordable price”
 Trader Joe’s created value for the target audience and
developed products, promotion & distribution to deliver that
value
 While shopping for groceries was mostly a chore, Trader
Joe’s created a fun environment to bring in more customers
Innovation in products
 Between 70-85% revenues are from private label products
 “Category leaders” travel the globe to find new items; items
that are usually not available in other stores
 Work with chefs to find ways to mass produce
 “Tasting panel” tries the new item before it is approved to mass
produce
 No market research; if consumers don’t buy, then item is taken
off the shelves
 Have fun with private label:
 Trader Darwin is the label for vitamins and the tagline is
“Survival of the Fittest”
Innovation in promotion
 Trader Joe’s does not provide any discounts or coupons like
the other supermarkets
 Quirky promotional materials include
 In-store billboards describing the products
 Frequent Flyer newsletter announcing new products
 Online recipes which use Trader Joe’s products
In store promotions
Promotion newsletter
Online recipes
Innovation in distribution
 Cost savings:
 Source products directly from manufacturers
 Cut out middlemen
 No stocking fees
 Develop products in partnership with chefs for the mass
market
 Business model innovation
 Costs savings
 Source directly from manufacturers, no middlemen implying
savings in cost
 No shelf-stocking fees2
 Early contracts for bulk volumes at hard fought bargain prices
 Better utilization of assets
 Lower inventory; fewer than 3000 SKUs compared to 40000
for traditional supermarkets3
 Smaller stores which is a result of lower SKUs and leads to
much higher revenues per sq ft (twice as much as any other
supermarket4)
2 http://www.traderjoes.com/value.html
3 http://www.consumerreports.org/cro/money/shopping/where-to-buy/supermarkets-10-06/overview/1006_supermarkets_ov1.htm
4 http://www.businessweek.com/magazine/content/04_17/b3880016.htm
 Trader Joe’s investment in capabilities
 Resources:
 Besides above-union wages and generous bonuses, Trader Joe’s
contributes an additional 15.4% of each worker's gross pay into
a company-funded retirement plan5
 Processes:
 No market research, but vital taste tests followed by product
development
 Values:
 Focus on quality, variety and cost of products
 Make shopping a fun experience (Evident in how employees
dress up and from the promotional material)
pay for entry-level part-timers starts at $8 to $12 an hour; first-year supervisors average more than $40,000 a year
5 http://www.businessweek.com/magazine/content/04_17/b3880016.htm
Conclusion