Trader Joe's is a privately owned grocery store that sells a variety of natural and healthy food and beverage

options. Their headquarters is located in Monrovia, California and they have about 350 stores in roughly 25 states. It was started by Joe Coulombe as a Los Angeles convenience store chain in 1958, and then the company was bought in 1979 by German billionaires Karl and Theo Albrecht, who founded the ALDI food chain. Trader Joe¶s competes within their niche market of organic and health food grocery stores with stores like Wild Oats and Whole Foods, as well as big grocery stores such as Hannaford, Roche Bros, and Market Basket. To keep costs down, its stores have no service departments and average about 10,00015,000 sq. ft. The company's specialty is its line of more than 2,000 private-label products (70% of sales), including beverages, soup, snacks, and frozen items. Some observers think that sales per square foot at Trader Joe's are hovering at about $1,000 -- twice the level of typical supermarkets. Sales last year were roughly $8 billion, the same size as Whole Foods and bigger than those of Bed Bath and Beyond.1 Their goal is to offer value and a dedication to quality service through warm, friendly, committed employees along with a pledge to offer quality products. Their mission is to ³bring customers the best food and beverage values and the information to make informed buying decisions. There are more than 2,000 unique grocery items in our label, all at honest everyday low prices. We work hard at buying things right: Our buyers travel the world searching for new items and we work with a variety of suppliers who make interesting products for us, many of them exclusive to Trader Joe¶s. All our private label products have their own "angle," i.e., vegetarian, Kosher, organic or just plain decadent, and all have minimally processed ingredients.´2 This mission requires a culture that supports loyalty and customer service through personal contact with the consumer. The commitment to the customer is captured on the Trader Joe¶s website, ³Our Product Guarantee: We tried it! We liked it! If you don¶t, bring it back for a full refund, no questions asked.´ The underlying message is that Trader Joe¶s desires to establish a personal relationship with the customer. Q1. Using Porter¶s Competitive Forces model, discuss Trader Joe¶s industry competitive environment. A1. Despite their unique strategy, Trader Joe¶s must still compete for customers with both large grocery stores and other µspecialty food stores,¶ such as Wild Oats and Whole Foods markets. To analyze the intensity of competition for Trader Joe¶s we can use Porter¶s Five Forces model. These forces include the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, the threat of substitute products and services, and the intensity of rivalry among competitors in an industry. The threat of new entrants is medium for Trader Joe¶s. There exists the possibility that competition in the form of a grocery store such as Whole Foods or Market Basket, a small specialty store, or a Wal-Mart or Target super store could open in the area at any time. In 2008,
1 2

Kowitt, Beth. Inside the secret world of Trader Joe¶s: http://money.cnn.com Trader Joes homepage - www.TraderJoes.com

and charge a higher price for this differentiation. Inside the secret world of Trader Joe¶s: http://money. Many competitors have jumped on board with the trend of offering organic foods. Most of the products sold at their store also carry their own brand name. The threat of substitutes is medium. Q2) List Trader Joe¶s SWOT factors Trader Joe¶s strengths include a selection of healthy and unique foods that are difficult to find in other local stores. However. Grocery stores are found in nearly every city in the United States. handing stickers out to kids. In order to retain customers Trader Joe¶s offers a very high level of customer service which is exhibited by employees bringing shoppers baskets if their hands are full and by walking customers to items instead of just giving directions. specialty restaurants.gov/oco/cg/cgs024.900 were convenience stores. thereby decreasing the leverage of an individual supplier. However. the rivalry among competitors is high. However. in addition to some staple foods. which means that they could switch suppliers and the customer would never know the difference. and refunds with no questions asked. Trader Joe¶s is able to stay ahead of these stores due to their low prices.htm Kowitt. Beth. Also. Trader Joe¶s has all of their suppliers sign secrecy forms so neither shopper nor competitors know who is making their products.com .200 grocery stores. There are typically more than one food store located in an area and this allows customers to have their choice of where they prefer to shop. Trader Joe¶s carries extensive specialty items that are imported from all over the world. The power of the buyer is also medium due to the variety of goods and services provided by its competitors within the industry such as Whole Foods and other grocery stores. Lastly.http://www. there is no other grocery or specialty store that offers the same shopping experience as Trader Joe¶s does. Also. It also appears that they have very loyal customers who would not be swayed by the lure of lower prices offered by another store. specialty foods as public awareness to proper diets continues to increase. Trader Joe¶s has much more control over their suppliers due to the smaller size of their stores and the number of SKUs that they stock. There are many stories of employees going out of their way 3 4 Bureau of Labor Statistics . however the selection still does not measure up to Trader Joe¶s. Restaurants do not really pose a threat either as there are not too many organic. For now. these stores serve so many individual consumers that individual buyer power is pretty much non-existent. Trader Joe¶s is also facing stiffer competition from Whole Foods and Wild Oats Markets.cnn.4 The power of suppliers is low due to the fact that Trader Joe¶s deals with a multitude of suppliers worldwide.3 The reason I would deem it medium and not high is because Trader Joe¶s offers unique products that other stores do not which is one of their advantages. Also. They send their employees all over the world to find the best quality foods that cannot be found in most other stores. these stores are actually focused on organic foods and environmentally friendly products.there were approximately 85.bls. of which approximately 25. As stated earlier. many big chain grocery stores have been offering more organic. They are famous for their everyday low prices and their dedication to customer service. such as: employees wearing hawaiin shirts.

I think that Trader Joe¶s could only stand to benefit from an increase in advertising. particularly its own house brands. Greenpeace recently created a ³Traitor Joe¶s´ campaign to pressure the company into stocking only sustainably harvested seafood. Business strategies and a few functional strategies. and other necessity items. new products with health claims fly off the shelf and health and wellness campaigns capture a lot of mainstream media. Trader Joe¶s has kept many of its products¶ origins. with Whole Foods Market and Wild Oats Markets leading the way. it will have to meet the standards of rival Whole Foods. as with the chain¶s pita chips. I see a potential problem arising from their refusal to provide information on where its products come from and how they¶re made. One of the opportunities that I can see for Trader Joe¶s is continuing to capitalize on the growing trend of healthy eating.to assist customers and they also have a no questions asked refund policy. They have a great brand reputation and they have extremely loyal customers. saying it will go sustainable. Their main strategy is to buy products directly from suppliers in large volumes. Also. only by 2012. the lack of storage space in the stores means ordering and distribution must be precise. For retailers to focus on healthy lifestyle choices is a strategic and savvy move as there are dollars to earn and consumers to capture. and Trader Joe¶s management would be smart to get on the right side of it as soon as possible. In an era of increasing scrutiny on local sourcing and having products be truly organic. Despite our country's battle with obesity. and the shroud of secrecy that hangs over the store¶s operations. certified-organic monitoring checks. in particular. have shown an intense focus on health and wellness.5 Some of its socalled ³homegrown´ products have surprisingly big-corporate roots.com/values/organic. The Food Marketing Institute reports that 57 percent of supermarkets are now offering a separate natural and organic food aisle or section. Also.http://www. their great service. toilet paper. A3) Trader Joe¶s uses various methods in order to provide their products at a low cost. Their weaknesses include: a limited inventory selection. The store does not stock staple items such as baby food. The chain caved. This is an issue that won¶t be going away. Americans continue to show that they're concerned with health and physical appearance. the once all-fun brand has increasingly drawn the ire of environmental groups.com/2009/07/13/thegreenpeace-vs-trader_n_230891. which offers consistent country-of-origin labeling and submits to independent. Also. a lack of storage space at the stores. and government regulations on organic food. As a result. Awareness and concern about what¶s in our food and where ingredients originate is only growing. This allows the 5 The Greenpeace vs Trader Joes Sustainable Seafood War . The threats facing Trader Joe¶s would be the poor economy. the growing trend of conventional supermarkets expanding their organic food offerings. In the retail industry it has become clear that baby boomers. Trendy diets become all the rage. covered in mystery.6 Q3) Discuss Trader Joe¶s strategies in terms of Corporate strategies. If Trader Joe¶s wants to keep its credibility in the health-food niche. which are really made by a company in the portfolio of PepsiCo. They are known for their employees¶ goofy attire.html 6 Whole Foods website ± http://www.php .huffingtonpost. and their great selection of exotic and healthy foods. A typical family cannot do all of its shopping at Trader Joe¶s. They have been in the business since the late 50¶s and have consistently been market leaders.wholefoodsmarket.

thus lowering the relative bargaining power of any individual supplier. and club cards. and distribution efficiencies. Expansion is carefully and cautiously executed because the challenge associated with expanding its unique culture requires a very detailed selection and training process.8 The growth of the organization has been achieved without debt. they are able to purchase large volumes due to the limited assortment of available products. which is money to put suppliers¶ product on the shelf. Trader Joe¶s buys direct from the manufacturers and puts the product in Trader Joe¶s private label. This reduction in cost to the supplier comes from using Trader Joe¶s private label on the goods. unlike most grocery stores.allbusiness.traderjoes. They also have in-store promotions where customers can sample highlighted products in order to influence them to buy them. Their expansion is fully selffinanced. and buy from many different suppliers. is the method of advertising.The Impact of Corporate Culture on Business Strategy´ http://www.html 9 ³Trader Joe¶s Experience . coupons. Since it is important that consumers will only become repeat buyers if the quality of the food is high. or promotional fees.´ this corporation sends their buying staff all over the world to negotiate prices on high quality foods. This strategy cuts down on costs to suppliers and the savings are then passed on to the customer. The other grocers must charge a higher premium for the product with a brand name. and thus price to consumers.company to act as its own distributor which decreases transaction costs. What this means is that that there is often only one package size offered and only one brand available (typically the Trader Joe¶s private label). are more inclined to be attracted to the unique product lines offered by Trader Joe¶s. Trader Joe¶s does not have sales or club cards because they offer the lowest price every day. Store location is determined by three key factors: density of population.com/marketing-advertising/channelmarketing/219840-1.9 The last major strategy to reduce costs. Calling themselves the ³traders on the culinary seas. newspaper advertisements.org/Strategy/Trader_Joe_Corporate_Culture_Strategy.themanager. educational level of the consumer. hence. Market research has revealed a relationship between education and consumer choices: The more highly educated tend to travel more and. In order to sell the same products as other grocers at a lower price. The relationship and interactions with suppliers is also an important component of the corporate strategy. couponing and advertising. They pay the suppliers with cash. The cost associated with the brand name comes from the high price of national marketing. Trader Joe¶s sets high quality standards on all of its private label foods. and then passed along to Trader Joe¶s in 1979. Also. selling.7 They taste more than 8000 samples per year. Even though the store does not sell in large volumes like other major grocers such as Market Basket and Shaw¶s. The operation remains free of union involvement²salaries and benefits are sufficient to ward off labor unrest. they do not require suppliers to pay a ³slotting allowance´. Trader Joe¶s uses weekly circular highlighting key items for sale for the week. Fearless Flyer is another marketing strategy Trader Joe's employs. This strategy was used by Aldi foods.htm . Fearless Flyer. While most grocery stores spend a significant portion of their budget on television commercials. Trader Joe¶s has very limited advertising. and thus build strong relationships and a good reputation. on time.com Trader Joe¶s is not your average Joe . is 7 8 Trader Joe¶s ± www.http://www.

Finally.distributed to the public and arouses environmental awareness among consumers. The result is an assurance of quality that other grocery stores cannot provide. How they accomplish this is also very different from their most obvious competitors such as Whole Foods. If the taste testers are unanimous in their high recommendation of the product. neighborhood stores that offer comfort. low price. Trader Joe¶s buys it and re-labels it. Personnel at Trader Joe¶s scour the world for products free of preservatives. It does not carry commodities such as soft drinks and other staple items typically found in your local grocery store. For their customers Trader Joe¶s provides value not primarily through the quality of its products. They taste-test all foods considered for private labeling. Their culture is both unique and difficult to copy because it involves the customers in an ongoing sense of discovery and adventure.com . Q4) Can Trader Joe¶s sustain its competitive position? A4) I believe that Trader Joe¶s can sustain their competitive position. It is one of their most successful marketing strategies. Shopping becomes an adventure that takes them into a store whose characteristics are often in opposition to those of traditional markets: casual. And because it is aligned to their specific target market rather than broad differentiation built around quality and service. Trader Joe¶s holds a competitive advantage due to its strategy to differentiate itself from any other grocery store chain. quality. The company prides itself on the quality of its private label products. It is clear that the unique branding strategy of Trader Joe¶s differentiates itself from all other grocery store chains and that differentiation as a corporate strategy can produce incredible results. as does Whole Foods. private labeling and price´ according to the CEO Don Bane. there are no substitutes for the combination of attributes provided by their culture and customer experience. it is more difficult to copy by those companies that are serving a bigger competitive space. providing attentive employees and offering extraordinary value. Bibliography 10 www. high service with a constantly changing and somewhat unpredictable product mix. but rather through their distinct shopping experience.traderjoes. The strategy includes carrying highly selective products. offering small. artificial colors or flavors or genetically altered ingredients. which account for 70 percent of the product offerings. The value that Trader Joe¶s offers to customers includes ³taste. They seem to be committed to providing selective products that cannot be found in grocery stores. because at Trader Joe¶s. 10 Conclusion Trader Joe¶s has successfully created a nice little niche for itself in a highly saturated market and has been able to create what appears to be a sustainable competitive advantage by offering high quality products at low prices. and the strategy is successful. at least at this time. customers become part of the culture rather than merely experiencing it. offering private-label products.

com. July 13.bls. 2009 <http://www. 2007 Volume 10. June1. <www.themanager.fortune/ind ex.oco.Trader Joes.com/2010/08/20/news/companies/inside_trader_joes_full_version.com.php ³Trader Joe¶s Secret Plan for World Domination´ Vegan. Issue 2. 2010 http://vegan.wholefoodsmarket.answers. Gerry. 2010.htm> .gov.org/Strategy/Trader_Joe_Corporate_Culture_Strategy. Answers. <http://www.com/marketing-advertising/channel-marketing/219840-1. Ami.Org. TheManager. August 23.Kowitt.com/blog/2010/08/23/trader-joes-secret-plan-for-world-domination Trader Joe¶s Company Profile.cnn. ³Trader Joe¶s Experience The Impact of Corporate Culture on Business Strategy´.com. ³Inside the Secret World of Trader Joe¶s´ CNNMoney.htm> Trader Joe¶s webpage <www. Beth.com/2009/07/13/the-greenpeace-vstrader_n_230891.html> Whole Foods website ± http://www.html> Cholia.cgs024. ³The Greenpeace vs Trader Joes Sustainable Seafood War´HuffingtonPost. ³Trader Joe¶s is not your average Joe´ AllBusiness.com/values/organic.htm> Thayer. Warren. Mark & Rossy.huffingtonpost.com> Bureau of Labor Statistics. August 23. <http://money.allbusiness.cg. 2002.com/topic/trader-joe-scompany> Mallinger.com. <http://www.com < http://www.

Sign up to vote on this title
UsefulNot useful