How does Trader Joe’s keep its competitive advantage against larger grocery stores? The main answer lies in its selling price for most of its products. This article will show you how Trader Joe’s remains extremely affordable without jeopardizing its quality.
Is Trader Joe’s Cheap? The Answer in 2023
The short answer to this question is yes! Most of the products at Trader Joe’s are at least 16% lower than other grocery stores in the United States. Trader Joe’s offers its products at 24% lower than the average prices, while the meat remained at least 8% lower than its average.
Despite these lower prices, Trader Joe’s maintains its quality standard as much as possible, encouraging more customers to buy from them.
How Trader Joe’s Remains Affordable Compared to Other Grocery Stores
It is still puzzling how Trader Joe’s created a business model that keeps its competitive advantage over larger grocery stores. The main secret lies in a few strategies Trader Joe’s uses to keep customers wanting more. Here are a few Trader Joe’s secrets that keep this grocery store so affordable.
#1 Value Over Everything Else
Trader Joe’s refuses to diminish quality to keep the price low, unlike other cheaper alternatives. Trader Joe’s values value over everything else. This idea of keeping its cost low is by carefully choosing the right products that people would want at significantly lower prices. No wonder the motto of Trader Joe’s is “great food + great prices = value”.
#2 No Name Brands at Trader Joe’s
Retailing name brands can be very expensive after accounting for the additional fees you pay the private corporation. Trader Joe’s focuses on creating private labels to prevent paying these excessive fees. At least 80% of all the products at Trader Joe’s belong to Trader Joe’s.
Trader Joe’s keeps most of the profit by cutting out the middleman in these transactions after paying different store expenses like salaries and utilities.
#3 Customers Cannot Buy These Private Labels Anywhere Else
The best part about creating private labels is obtaining the sole rights to these products. Trader Joe’s refuses to allow other retail stores to sell these products in their grocery stores. By keeping these products accessible only at Trader Joe’s, customers would need to constantly visit the store to get their weekly supplies.
#4 Low Operational Costs
Paying huge amounts to operational costs can accumulate, especially for a company whose business model focuses on affordability. Unlike other high-end grocery stores, Trader Joe’s did not include any full-service butcher shops and the like.
There were also reports of some Trader Joe’s branches using energy-efficient lights to keep electricity in the store low. Some Trader Joe’s branches also choose to keep products in boxes rather than placing them on shelves to avoid paying people to do it.
By doing these cost-saving strategies, the company keeps its expenses low to prevent incurring losses for the period. By mixing these strategies with good value, the company eventually makes more than it spends.
#5 Trader Joe’s Carefully Chooses its Produce
Any product that does not sell is just wasted space to Trader Joe’s. If a product is not attractive to the customer, it would just spoil and go to waste, forcing the company to incur a loss for it. Trader Joe’s carefully chooses the products it would include on the shelf to combat this threat.
More precisely, Trader Joe’s only chooses the right products customers would travel around the state to buy. Here are some products that Trader Joe’s is most popular for.
- Nuts About Rosemary Mix ($6.99)
- Italian Truffle Cheese ($12.99)
- Cold Brew Coffee & Boba Coconut Non-Dairy Dessert ($4.99)
- Lovely You Rose ($7.99)
Despite how premium these products sound, the company ensures to keep its cost of manufacturing and distribution low to maintain its low prices.
#6 No Excessive Marketing Strategies
For larger grocery stores, they would spend so much to get their products on television, social media sites, and the like. However, Trader Joe’s believes that this strategy is not the best for them.
To save on excessive marketing strategies, Trader Joe’s uses its famous Fearless Flyer to keep customers informed of any changes in the grocery store. This newsletter prevents additional costs for Trader Joe’s while performing the same purpose as those expensive advertisements.
Furthermore, it is impossible to deny the presence of word-of-mouth as an effective marketing strategy for Trader Joe’s. These customers serve as walking advertisements for people who haven’t visited the store by constantly providing value.
#7 Less Attention on Discounts
Because Trader Joe’s is already significantly affordable, the company focuses less on discounts and rebates to encourage customers to keep buying from them. Most of the discounts come from employee discounts to reward their Crew Members.
However, if customers want to avail of these discounts, they would most likely get these from their service card provider through grocery rewards.
#8 Trader Joe’s Does Not Intend to Offer Delivery or Pickup
The main strategy is to keep cash for as much and as long as possible. By offering delivery options for their customers, Trader Joe’s would need to spend on additional crew members, significantly diminishing the profits they will take home by the end of the day.
According to Trader Joe’s, creating an online shopping system would require more planning, spending months or years before they can get it up and running.
More importantly, Trader Joe’s gains more traction by seeing its customers in these respective branches. Showing the number of people visiting these stores would encourage more people to visit them.
#9 Trader Joe’s Sells their Bananas Individually Rather than in Bunches
Unlike other grocery stores, the company sells its bananas at 19 cents each because Trader Joe’s does not have weighing scales to measure bulk orders. Trader Joe’s CEO Dan Bane got this idea from an old lady who stared at the product without buying anything. The main reason was that these bulk orders would be too much for most of the company’s customers to buy.
#10 Not All Products at Trader Joe’s Are Organic
Organic products can be very expensive to produce, which Trader Joe’s might not have the overhead to pay for. Despite Trader Joe’s stating that these products are “made with organic material,” The Cornucopia Institute found that only 70% of its composition is organic.
#11 Trader Joe’s Sources its Produce Worldwide
Like other large corporations, Trader Joe’s chooses to acquire most of its goods from underdeveloped countries to save on additional costs.
#12 Trader Joe’s Thrives in Smaller Spaces
Trader Joe’s intends to acquire smaller spaces to save on rent and leases. Despite these smaller spaces, Trader Joe’s maximizes it by using every square foot wisely. According to Nathan Rodgers, this strategy explains why Trader Joe’s has low operational costs.
Why is Trader Joe’s Wine So Cheap?
If you want to save money without lowering the wine quality you purchase, buying some of the bottles at Trader Joe’s might be the best option for you.
Most of the wine offered by Trader Joe’s is from Bronco Wine, one of the largest wine producers in the United States. Currently, this company sells 60 million bottles after working non-stop to produce Charles Shaw.
Despite its lower prices, the wine at Trader Joe’s still seems to be a sought-after product for many loyal Trader Joe’s customers. Customers would buy these affordable wine bottles rather than more expensive ones in more expensive grocery stores to save money.
Are the prices at Trader Joe’s Worth It?
Trader Joe’s provides various products that are better than traditional name brands without the extraordinary prices. Since Trader Joe’s values value over everything else, Crew Members test most of the products they release to the customers.
If these products do not please the customers, Trader Joe’s goes back to the drawing board to conceptualize a new product to offer them. Thus, quality control keeps the competitive advantage of Trader Joe’s against other larger grocery stores.
However, there are still those products that Trader Joe’s could not lower the prices for. Some products may also be affordable but not the same quality as those name labels at more expensive grocery stores.
Conclusion
Trader Joe’s performs different cost-cutting strategies to maintain its low prices for its customers. However, Trader Joe’s distinguishable from other competitors is its ability to produce good products without hiking too high prices.
