Trader Joe’s has enjoyed a loyal, receptive customer base and a strong brand image over its 48-year history. But as competition increases from both high- and low-end competitors, Trader Joe’s is failing to leverage its customer loyalty and supply chain resources to maximize profit potential, increase its reach and product portfolio, and become a one-stop shop for groceries. Analysis
Trader Joe’s has acquired and developed a valuable collection of resources and capabilities in the supermarket industry. They have built a brand image that is much stronger than any of its competitors, emphasizing fun, trustworthiness, and product exclusivity and value. Because of this, Trader Joe’s enjoys a “cult-like” customer base that is excited about new products and trusts the company to provide high-quality, low-cost specialty foods. Additionally, high salaries and benefits keep employees happy and enthusiastic about working for the company, which in turn improves the customer’s in-store experience. Trader Joe’s also takes advantage of a unique relationship with their suppliers, protecting unique company products and “cutting out the middle man,” allowing customers to enjoy lower prices free of markups.
A frequently overhauled product portfolio that explores new tastes encourages buyers to try items they may not be familiar with and buy in bulk. Finally, Trader Joe’s small stores and low stock-keeping units (SKUs) gives them the highest revenue per square foot of selling space in the industry of $2,054.05, almost twice that of Whole Foods (see Exhibit 1). These resources and capabilities combine to form a set of unique core competencies: a loyal, enthusiastic customer base that trusts in the company’s products and practices; a powerful brand image as the fun, friendly, and wholesome grocer; a unique relationship with suppliers to remove merchandisers from the equation; and extremely high employee loyalty and job satisfaction.
Despite these unique core competencies, Trader Joe’s has a number of weaknesses in relation to its competitors: a lack of point of sale (POS) technology that would decrease both checkout lines and customer frustration from waiting; small, cramped stores with unsuitable parking accommodations; an absence of perishable, staple products like meat, dairy, and produce that could increase sales due to a customer preference for “one-stop shopping,” and a complete lack of social media involvement with their passionate customer base. Recommendations
Trader Joe’s resources are valuable, rare and costly to imitate, but they are not organized to capture value. Their strongest resources are their loyal customer base and supplier relationships, and they should maximize profit per customer by offering staple items like produce, meat, and dairy direct from suppliers that would keep customers in the store and encourage one-stop shopping only at Trader Joe’s. Additionally, they should streamline their POS systems and facilities (including parking) by opening standalone locations and confining employees to certain tasks for a longer period of time to maximize efficiency. Finally, Trader Joe’s should get involved in social media to tap into a vast collection of fans and source ideas for new products, improved practices, potential new store locations, and the utilize the largest network of free or low-cost word of mouth promotion.