The employees are wearing tropical shirts, the product labels feature puns and silly rhymes, and the manager goes by “Captain.” But dismissing Trader Joe’s as a joke is a bad idea, especially if you’re another grocery store chain that wants to appeal to discerning shoppers. Just ask Whole Foods.

The roots of its success are as diverse as the customers Trader Joe’s attracts. For example, its product lines offer organic, gourmet, and multicultural options (and sometimes combinations of all three), rather than focusing on any one type of product appeal. Furthermore, those options rarely are available anywhere else, because 80 percent of Trader Joe’s product assortment consists of its own private labels. The plentiful, unique options also tend to be relatively low priced—likely an artifact of Trader Joe’s ownership by the same family that runs the infamously low priced ALDI chain.

With these product and price offerings, rather than being all things to everyone, Trader Joe’s is a little something for anyone. Full, stock-up shopping trips still require another grocer, but for a little something special and tasty, Trader Joe’s provides a compelling alternative. Accordingly, it attracts a diverse fan base, approximately equally split between households that earn more than $100,000 annually and those that average closer to $25,000. Still, many of the customers at Trader Joe’s exhibit some appealing similarities for retailers, including high levels of education, a health emphasis, and a high level of comfort with technological innovations.

In these traits, Trader Joe’s customers are remarkably similar to those who shop at Whole Foods, despite the vast differences in the price positions the two chains take. The Whole Foods CEO even has admitted that the company views Trader Joe’s as its primary competitor and that its 365 private label represents a direct response to the offerings on hand at Trader Joe’s.

Yet its unique positioning sets Trader Joe’s apart from other grocers in consumers’ minds; it also helps it stand alone when it comes to some pertinent measures of success. Namely, in the grocery industry, the average rate of sales per square foot is $521. Whole Foods, with its high-end, pricy, trendy image, nearly doubles that rate, with sales per square foot of $973. And Trader Joe’s, with its small, island-themed stores? It achieves an utterly astounding $1723 per square foot on average

Discussion Questions: 

1.  What is Trader Joe’s retail strategy, i.e., its target market, retail format, and bases for sustainable competitive advantage?
2. How does it compete against Whole Foods?
3. Is it winning the battle?

 

Source: Elaine Watson, The Packaged Facts, April 15, 2014