Why Trader Joe's Reign Supreme
The organic food market has exploded in the last couple of decades. With a larger percentage of Americans seeking healthier options and fresher produce, the rise of the organic grocery store has been unparalleled. Companies like Amazon-owned Whole Foods have attempted to dominate the market with competitive pricing and nationwide store expansion into areas with high organic food demand. But one company has reigned supreme in its profitability off of the organic food market: Trader Joe’s. Trader Joe’s has carved its path to profit by knowing what it has to be, whilst also maintaining high wages and benefits for its employees. But what does that mean? What does Trader Joe’s do that sets it apart?
For starters, it keeps costs low. It does this in a few different ways. First, Trader Joe’s chooses it’s locations specifically to lower building costs and keeps its stores on the smaller end. For the most part, Trader Joe’s opens new stores in strip malls or shopping complexes: a stark contrast to Whole Foods, which opens its stores based on the high demand of areas. This tactic eliminates costs of utilities and other building maintenance for Trader Joe’s because those costs are covered by the shopping complexes.
Even in cases where Trader Joe’s is paying some building costs, it keeps the physical size of its store modest. Whereas companies like Whole Foods open massive stores spanning thousands of square feet, Trader Joe’s tries to avoid these high building costs. If you’ve ever been in a Trader Joe’s, you’ll understand the more intimate venue it offers. While Whole Foods provides an endless corridor of isles and isolated sections for ready-made dinner options like sushi and pizza, Trader Joe’s compresses its item selection to just a few isles, and ignores the ready-made section altogether. It is able to maintain this compactness by offering a limited selection of each type of item, thus shortening aisles.
Whenever possible, Trader Joe’s will offer its store-branded selections only, thus significantly reducing costs of external food sources. 80% of the products Trader Joe’s offers are inhouse. Further, its store-branded items are less expensive than the equivalent of other stores, being 15% cheaper overall than Whole Foods’ 365 items. It can do this by working directly with suppliers to negotiate low prices, cutting unprofitable goods from shelves rapidly and not charging supplier fees. These cheap, exclusive choices are typically fan-favorites of the store, and keep its customer base coming back for more.
Along with low costs, Trader Joe’s also knows how to appeal to its customer base to preserve high repeat customer rates. Trader Joe’s ensures that it differentiates its original products. It pours investment into the innovation of its products to keep its customers satisfied. This shows when considering that Trader Joe’s consistently possesses one of the highest customer satisfaction ratings in the grocery store industry. It has been rated consumers’ favorite grocery store chain in America. Trader Joe’s produces unique, low priced goods, including a high-quality wine collection. Each customer develops an appreciation for different Trader Joe’s selections, and returns to its stores again and again specifically for those selections. But even beyond product selection, customers have come to value the Trader Joe’s experience itself.
Through engagement with consumer feedback, Trader Joe’s has demonstrated its loyalty to its base, and its willingness to create the best environment it can. While other competitors are actually adjusting their business models to appeal to a more mainstream consumer base, Trader Joe’s has been catering its store model and experience based on the voices of its customers. When customers demanded Trader Joe’s stop using single-use plastic bags for packaging, it listened and replaced plastic bags with more eco-friendly bagging options. Complaints about store hours have resulted in an adjustment. Trader Joe’s cares about its customers’ voices, and it makes sure they know it does. This happens on a larger scale, but in individual stores as well.
Trader Joe’s has also differentiated itself by creating a friendly experience at its stores. Stores often offer free samples and even fun scavenger games for kids, making the Trader Joe’s experience more family-friendly. Even when products customers wanted to try are not available among free samples, they are allowed to request special sampling of those goods. Perhaps the most noticeable thing in a Trader Joe’s store is the engagement with employees. Trader Joe’s has stressed the importance of developing a relaxed, helpful environment at its stores. Employees are taught to aid customers as much as possible. They present a happy atmosphere to customers through their upbeat attitudes. So how is Trader Joe’s able to encourage and perpetuate such a friendly environment? Well, for as well as it treats its customers, it treats employees even better.
Along with its profitable business model, Trader Joe’s also manages to provide an incredible work environment for its employees. It has ranked among the top 30 best places to work in America. Trader Joe’s separates its employee treatment from other grocery store chains. The entry salary for just a floor employee at Trader Joe’s starts at $18 an hour, and can go as high as $30 an hour. But the higher you climb through the rankings, the higher that salary jumps. Perhaps most incredibly, store managers at Trader Joe’s can make upwards of $111,000 a year. This also comes with a potential 7-10% raise each year for employees.
But even better, salaries come with additional benefits for healthcare and even retirement plans. Eligible staffers are offered 10% of their annual salaries towards a retirement plan, along with paid leave. Every employee at Trader Joe’s is offered healthcare coverage, including even part-time employees. Finally, employees have praised the relaxed social environment, relationships with customers and caring, attentive managers. All of this combined forges a very secure and happy situation for employees, who can then transmit that happiness to customers.
Trader Joe’s has fashioned a business model that excels within the grocery store industry. Its profit margins, customer satisfaction and employee benefits are unmatched in the business. Those three things together create a formula for sustained success and continued growth. As Trader Joe’s opens new stores to reach a larger customer base, it looks to further separate itself as the monarch of the organic grocery industry.
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