Trader Joe's ranked among the most successful grocery stores in the United States in 2013. According to experts, the company had the highest sales per square foot compared to any other major player in the market in the same industry. However, in 2013, the company faced several risks as bigger chains (e.g. Wal-Mart and Tesco) started to open small-format stores, which resembled Trader Joe's approach. Furthermore, some analysts started to question whether the company was losing its authenticity and "quirky cool" as the company has seen massive expansion across the nation. What should the company do to ensure further growth?
David L. Ager, Michael A. Roberto
Harvard Business School (714419-PDF-ENG)
Sep 7, 2013 (Revision: Dec 9, 2013)
Case questions answered:
Case study questions answered in the first solution:
- Identify multiple innovative efforts of Trader Joe’s over its 50+ year history.
- Considering the uniqueness of Trader Joe’s to its peers, what has made Trader Joe’s unique?
- How do they continue to compete against the larger chains?
- How do they manage to outperform their peers?
Case study questions answered in the second solution:
- What’s the key issue/problem/opportunity in this case?
- Which of the generic competitive strategies do you think Whole Foods, Kroger, and Trader Joe’s were using at the time of the case? Explain why. Don’t be afraid to use value chain logic to support your answer.
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Trader Joe's Case Answers
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1. Identify multiple innovative efforts of Trader Joe’s over its 50+ year history.
Trader Joe’s innovative efforts over its 50+ year history include:
Smaller-footprint neighborhood grocery stores (less than 15,000 square feet) that stock unusual and interesting foods and drinks sourced from around the world that might be new to customers and those from around the corner. (Typical grocery stores are 40,000 to 50,000 square feet).
The company carries about 4,000 stock-keeping units per location as compared with as many as 50,000 units that are generally carried by most grocery stores. Instead of a wide selection of fresh meats and produce, the store features a wide collection of frozen foods. It also tends to sell its fruit by the piece rather than by the pound.
The company offers 80% or more low-priced private label products. It includes its now-famous Charles Shaw Winery private label wines that cater to its intelligent, educated, sophisticated, and interesting customer base. These are the urbanites, Volvo-driving professors, college students, and Trader Joe’s groupies who are health conscious, love to travel, like trying new things, and are interested in finding a great bargain.
The company maintains its uniqueness and low prices by avoiding the following trends and purchasing directly from manufacturers rather than working through distributors and wholesalers. It also stays away from trade shows that feature products that every other retailer sees. Unlike other grocery stores, suppliers are paid promptly and allowed to place their products on the shelves without incurring a charge.
The company requires vendors to maintain complete secrecy about their relationship with the retailer to keep rivals and customers from knowing where it sources its private label products. The suppliers provide Trader Joe’s with a much lower-cost version of their branded products that might be sold at other retailers.
Low investments in technology. There are no self-checkout lanes or flat-screen TVs at checkout counters. Trader Joe’s prefers a customer-friendly environment where customers actually talk with employees.
Marketing primarily through a customer newsletter produced in-house, Fearless Flyer. The company provides information to its customers. These include various products and new product additions, quirky, employee handwritten in-store signage, and occasional short radio advertisements that it produces itself, instead of the traditional television commercials requiring professional actors or cutout coupons in the Sunday newspaper. There are no Facebook pages, Twitter accounts, or loyalty programs. Customers can return products with no questions asked.
Hiring reliable staff and paying them wages that are more than what is received at rival grocery stores. The company contributes 15.4% of employees’ pay to retirement accounts. Some health care benefits are even offered to part-time employees. New “crewmembers” receive ten days of indoctrinating training about the company’s seven core values.
2. Consider the uniqueness of Trader Joe’s to its peers, what has made Trader Joe’s unique?
From its marketing strategies to its huge array of private label offerings, Trader Joe’s is unique in almost every aspect of its operation and on several levels compared to its peers.
Trader Joe’s carries a large variety of products from around the world, yet only a very few brand name products.
Store managers are discouraged from making announcements to crewmembers over the intercom system. Instead, a bell system to communicate key messages is used.
Crewmembers restock shelves during normal opening hours to allow customers to talk with and ask questions. Crewmembers walk customers directly to the products they are trying to locate rather than direct them to an aisle.
Crewmembers are friendly, people-people who are well-looked-after with great benefits, paid well, and often hang out with each other after work hours.
Trader Joe’s has created a…
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