Group 29

Issues

There are more businesses in the grocery store industry making the competition fierce. This has led to
companies dedicating more of their resources to a profit margin that is becoming smaller. The main
competitors in the grocery industry are becoming bigger in size, yet doing very little to stand out. Trader
Joe’s stands out because their stores are smaller and their profitability is much higher than the industry
average.  They are unique because of the direction they have taken. What steps can Trader Joe take to
maintain their unique business model, while increasing profits?

Analysis
Trader Joe’s stores are centrally located in city centers within college towns, with smaller footprint stores
and generally attract educated shoppers. They carry a vast range of specialty products and private label
merchandise thus making it an attractive retailing destination to varied customers.  The company also
maintained a dynamic product mix that made the shopping experience unique as the customers won’t
know what products might not be available next week and what would be the new products. It attracted
large numbers of loyal customers who were health conscious and liked trying new things. Trader Joe’s
marketing push is through its Fearless Flyer. Their loyal customer base through word of mouth has
created a buzz around the Trader Joe brand that none of the other companies in the industry can replicate. 
No matter how much money their competitors throw into advertising, they can’t replicate Trader Joe's
marketing success. This has saved the company lots of time and money in marketing. This allowed the
company to focus on providing good products and maintain their in-store atmosphere to achieve a
trustworthy reputation. Trader Joe’s developed a good corporate culture by paying staff better, offering
health benefits and excellent training.  This has created an ideal side gig for artisans.  People who have a
way of supporting themselves while they chase their dreams. People like actors, musicians, and artisans. 
Because of their interests, they have lively, outgoing personalities. Trader Joe’s has created an
environment where employees want to be there and enjoy being there.  This in turn has led to a fun
shopping experience for the customer. 
Trader Joe’s has been expanding across the nation, with opportunity has come challenges and threats. One
concern with the increase in stores is an increase in bureaucracy.  Will the introduction of policies and
procedures create stores that are more similar in atmosphere to their competitors? The retail industry has
always been highly competitive, and there are also the threats from new entrants which try to copy the
same business model. With the booming market size, Trader Joe’s product strategy could become a
hidden disadvantage since it only offers specialty products and customers might need a larger selection of
general items and the wide availability of substitute products can also be a threat. In the retail industry,
buyers have the higher power because of the low switching cost and easy access to substitutes. Suppliers
also have higher bargaining powers because only a smaller number of suppliers could provide for the
specialty merchandise. 

Recommendation 
Trader Joe's should continue to introduce new specialized products while expanding its private label
offerings. While their business model has generated significant profits, they must differentiate themselves
from competitors in the coming years by expanding beyond industry boundaries and evolve into a
specialty food items grocer that primarily carries specialty goods and private label products. Furthermore,
they must maintain and expand their direct relationships with manufacturers to gain additional cost
advantages. Providing a unique and differentiated product will widen the gap between customer
willingness to pay and lower costs incurred, giving them a competitive advantage.