Trader Joe’s is an American privately held chain of grocery stores founded by Joe Coulombe. Trader Joe’s have been successful business for long time with their unique innovative strategy of selling natural and organic food products with only one brand of an item for low price. Their unique culture of relaxed beach environment and helpful knowledgeable employees makes their customer to stay loyal to the brand. Eighty percent of Trader Joe’s has in-house products that differentiate them from competitors and hard to imitate. Trader Joe’s target young educated people who want to eat healthy for low prices. They can really expand their business by investing in marketing, social media, loyalty- card program and building parking garages and gain bigger broader market segment in food industry. This also will help them competitive advantage over their competitors as they will have solid brand image and be successful over the long term.
The strengths of Trader Joe’s are selling organic & fresh grocery at low prices, introducing new products to their stores frequently and offering friendly customer service. Trader Joe’s sell natural and organic food at cheaper price than its competitors. They buy in bulk one item rather than buying lot of similar items, which gives them competitive advantage over other supermarkets. Trader Joe’s introduce 10-15 new products every week and had special season items and; thus customers liked trying new items and were getting best product for as much time as stores had the products for. Trader Joe’s employees were knowledgeable, helpful and happy, which made them communicate much better with customers and build a long lasting relationship. This aided in Trader Joe’s customers becoming loyal to the company.
The weaknesses of Trader Joe’s are lack in social media, low advertisement, and targeting small market segment. Firstly, Trader Joe’s didn’t have any interaction with media about the company. In addition, they were not utilizing the free social media tool and were not communicating with their fans on Facebook or Twitter. They didn’t much advertise about the company which is a weakness because this would hurt the sales they can get by advertising since they were selling natural and organic products for low prices. Lastly they targeted only smaller crowd which would also affect that revenue instead of targeting broader segment of people.
Since more people are graduating and becoming educated, Trader Joe’s can target them to get higher market share and by marketing they can convey their goal to these educated people. Moreover, they have opportunity to offer baby related products as lot of people buy baby products when they are at grocery shops.
Threat to Trader Joe’s are that their secretive private label goods can be identified by competitors and can imitate. Other treat is that the company can loose it’s charm when they grow because they are no more special to customers.
Porter’s Five Forces
The threat of new entrance is medium because Trader Joe’s is not a supermarket company, so capital requirement is manageable. Getting good quality food for cheaper price is hard to deliver but it is not impossible. However, brand name is difficult to built that Trader Joe’s has done after so many years.
The bargaining power of suppliers is low as Trader Joe’s purchase very large quantities of each item in their store, which make the suppliers to give them lowest price. Moreover, suppliers wanted secrecy from Trader Joe’s not disclosing the low price as the to other competitor store suppliers were selling for high prices. If the price of an item increases for suppliers, they can pass that on retailers in food industry.
The bargaining power of Buyers is high as customers have lot of other grocery stores option to goto if they thought prices at Trader Joe’s were high. However, in Trader Joe’s case they were offering natural, healthy and organic food items far cheaper than their competitors. So customers were loyal to Trader Joe’s.
The threat of substitute in food industry is medium because people can eat outside more often rather than cooking at home. Moreover, other brand of an item might be more likable by the customers over Trader Joe’s brand.
The intensity of competition is high as Whole Food and Kroger are trying imitate what Trader Joe’s are doing, and since they already have brand name achieved, it is not hard to get their prices down by negotiating with suppliers and making their own brand name organic food.
In conclusion, the food and grocery industry is attractive since more companies are going towards natural and organic food. With right marketing techniques , good customer service and quality products, it would be good investment in this industry.
Trader Joe’s demographics are college students, health conscious, out-of-work professors, and most important educated customers.
Socio-Cultural environment shows that society is gearing towards more natural and organic food and becoming health conscious. More people are having homemade food from savings perspective.
Political environment show that FTC has tighten regulation to keep competitive environment. Also, due to Obama Care there is some savings for people that makes grocery products more affordable.
Technological environment shows that there is more Point of Sales systems available with electronic shelf labels and scanner. In addition, self-checkout registers and advertising through mobile apps are getting more common.
Economic environment factor shows that during economic downturn, in which i people tend to shop more at grocery stores. The gas prices has been low which gives disposable income to try new items at grocery stores.
In conclusion, environment analysis suggest that people in the current economy are getting extra income that they can spend on food that are natural, organic and healthy for them. With competitive market, the trend is moving towards healthy and low price options.
From the SWOT, Porter’s Five Forces and Environment Analysis, I recommend Trader Joe’s to increase marketing and advertising their brand much more, create more parking space or redesigning outside of current stores, and giving customers incentives to keep them returning to Trader Joe’s. Trader Joe’s should start using social media tools and use mobile applications to reach out to their fans and show they care about them. This requires less capital investment and offer great way to reach fans and building new customers.
Trader Joe’s should make great shopping experience by making their parking lot bigger. They can built parking garages or decks to accommodate lot of customers increasing revenue of the company. Trader Joe’s should give customers incentives through loyalty-card program, and offer coupons on their website and mobile apps that can be added to customers loyalty cards to be easily redeemed. This will motivate customers to come back to their stores and buy more products, thus increasing the company sales and profit.