Trader Joe's

Trader Joe’s Case

How challenging is it to make money in the supermarket industry in the United States?

        There are 4 major super market chains in the United States; Wal-Mart, Kroger, Safeway and Supervalu. For the past 5 decades those 4 supermarkets have had the most market share throughout the United States. In the last decade there has been a swift to new trends such has Trader Joes. Supermarkets like Walmart that have grocery revenue that exceeds $100billion are having to compete with premium players such as Whole Foods and as the article states “hard discounters” such as Dollar General and Aldi. The comparison is that of having between 4,000-100,000 SKUs like Trader Joes and Dollar General to 100,000 SKUs that is 10 times that of the smaller competitors, such as Walmart

        The success of a supermarket is determined by their grocery sales and the square footage of the selling area. The major supermarkets are keeping to the trend that technology is better by trying to make the store most cost effective, having better products that are somewhat healthier and organic, carrying all the major brands and bigger stores. Meanwhile the smaller competitors such as Trader Joes and Aldi are focusing on tradeoffs. Rather than spending money on technology they are focusing on paying their employees better wages, that make them want to come to work. Instead of trying to cater to all type of people, there are certain characteristics that describes a customer of Trader Joes, that targeted to college graduated, travelled, inquisitive individuals.  

        To make money in the supermarket industry in the United States it comes with large risk do to having to be somehow different from everybody else. There are tradeoffs and competitive strategy needed. Strategic positioning so that you enter a market that you know there is a need and want for your services. And most importantly have revenue growth, due to the supermarket industry decreasing 51% inn 2013.

What are the key trends that are threatening traditional supermarkets?

        Traditional supermarkets try to tailor to everybody, such as Walmart that is most known for its “Low Prices”, or Wholefoods that caters to the premium population that follows healthy trends and is known as “wholepaycheck”. Supermarkets are now being custom-made for a determined customer; their brand loyalty is no longer determined by their prices but other factors that contribute to a better experience.