Trader Joe's Case Study

Bethany Winkin

BUS 400

Professor Rustambekov

September 26, 2017

Trader Joe’s

1. Supermarkets make money in two major ways: specialized products that are priced at a premium, and discount products that are priced at a low cost. It is hard to make profits in the supermarket industry because 70-73% of the price of food comes from product costs. Supermarkets used to make up about 2/3 of the grocery industry, but now wholesale clubs, pharmacies, and large discount retailers are threatening that market share.

This shows that Whole Foods is the most successful in their strategy across the board, except in asset turnover. This is due to the face that Whole Foods charges a premium for their products, and has many stores around the country. The other supermarkets are less known, and get more lost in price wars.

1. This shows that you can charge a premium for products in this market and still make profits, if you position your brand correctly. You can also position almost the same products at a low cost and still make profits if you place your stores in the correct locations and appeal to the correct people.

1. Trader Joe’s has many competitive advantages, which can be divided into physical advantages and cultural advantages. The physical advantages include product differentiation, their low number of SKUs (80% of which are private label items), their chevron layout, and their everyday low pricing philosophy. The cultural advantages include their emphasis on customer service, their employee satisfaction, their training centralized around company values, their delicious free samples, and the fact that they are a privately traded company. I think that as long as they stay a privately traded company, they have a good shot of maintaining their competitive advantage. It is hard to compete with a company who is not transparent in their strategy.
2. The threats to Trader Joe’s are rare, due to their differentiation within the market. One threat is their constantly changing products, which lead to stock outs and unhappy customers. Another threat is their lack of a standard marketing platform; they do not have a strong presence on social media. Finally, other companies such as Whole Foods are incorporating a wider variety of organic products.
3. I think that there are some things that Trader Joe’s could improve upon in order to increase their profits. Customers often complain about the lack of space in Trader Joe’s parking lots. As mentioned above, Trader Joe’s could use more product variety, so consumers are able to one-stop shop there. Another improvement could be the frequency of promotions for employees. This would only increase employee satisfactions.
4. Whole Foods is definitely in the same market as Trader Joe’s. They both sell natural and organic foods. There are some key differences, however. Trader Joe’s focuses on lower prices, while Whole Foods focuses on premium prices. Whole Foods is also implementing  loyalty program, which may pose a threat to Trader Joe’s. Many consumers have the perception that Whole Foods is for only affluent shoppers, which hurts their brand. They do, however, have many more locations than Trader Joe’s.
5. I think that supermarkets should make a bigger effort to eliminate waste. Even if there is food that is unsellable, there are definitely other places it can go besides the trash. I know in my hometown, the food goes to a homeless shelter. This solves two problems- waste and hunger. On average, grocery stores throw out $2,300 of food every day. As a solution, they could donate this food, or create affordable, easy to-go meals that they could either sell for a reduced price or give away to those who are less fortunate.
6. See excel spreadsheet.