Is Trader Joe’s success formula becoming obsolete?
Through a special arrangement, presented here for discussion is an excerpt of a current article from Frozen & Refrigerated Buyer magazine.
With its high-quality products, value proposition and knowledgeable and friendly staff, Trader Joe’s often finds itself at or near the top of various industry “best of” lists. However, the quirky chain may still face some challenges as it expands.
An obvious potential shortcoming is not offering e-commerce as e-grocery has taken off. Beyond challenges associated with attempting curbside pickup in a Trader Joe’s parking lot, the grocer doesn’t want customers ordering online because it takes away from the store experience. Trader Joe’s president of stores Joe Basalone said in a recent interview with Kitchn, “For us, the brand is too important, and the store is our brand.”
Karen Kelso, VP of retail insights for mass and club at Kantar, agrees Trader Joe’s in-store experience is “a fundamental part of its brand,” but also said Kantar’s data shows “commerce and omnichannel options are firmly embedded in shopper preferences, and this is a long-term, sustained trend that we don’t expect to change.”
Ms. Kelso also believes some improvements in the area of logistics and supply chain would help Trader Joe’s maintain a more consistent supply of high demand items.
Supply chain disruptions could have an outsized impact on Trader Joe’s compared to other retailers. Jim Hertel, SVP at Inmar Intelligence, observes, “In small-format limited assortment stores, each SKU plays a disproportionately important role because there aren’t as many substitutes on the shelf. What’s more, the many unique items in Trader Joe’s range with destination appeal mean that out-of-stock items are that much more meaningful to shoppers and that much more difficult to source from other suppliers.”
Trader Joe’s lacks a loyalty card that could provide customer data and its EDLP strategy removes the thrill of deal-hunting shoppers may find at other grocers. Gary Stibel, founder of New England Consulting Group, however, believes “the lack of promotion actually reinforces the value proposition.”
Inflation could be beneficial as shoppers trade down from places such as Whole Foods, but also a challenge. Said Neil Saunders, managing director at GlobalData Retail, “Trader Joe’s needs to walk a tightrope between maintaining its margins and maintaining its reputation for value.”
- Frozen & Refrigerated Buyer – November 2022
- Trader Joe’s Reveals Why It Will Never Sell Products Online – Kitchn
DISCUSSION QUESTIONS: What do you think Trader Joe’s needs to work on? Will the lack of e-commerce, a loyalty program or discounts found at other grocers become bigger liabilities for the chain down the road?