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Quality and taste are key competitive differentiators.
Higher-end shoppers are a major target market.
New products create a treasure-hunt atmosphere.
Trader Joe’s occupies a unique position among perishables retailers.
With relatively smaller-sized stores that are typically between 12,000 and 15,000 square feet, the retailer does not have the space to offer extensive SKUs, or the sales volume to significantly drive down prices.
And with about 375 outlets in more than 30 states across the U.S., the Monrovia, Calif.-based operator also is not in position to attract many consumers seeking a geographically closer store.
Trader Joe’s biggest differentiator is its uniqueness, particularly with perishables.
Indeed, the vast majority of Trader Joe’s perishables are all-natural, private-label items which consumers cannot get elsewhere, and which typically appeal to the “foodies” who are often seeking great-tasting, diverse and high-quality offerings.
Stores also frequently launch new selections, as the retailer says it will often replace an item that “doesn’t pull its weight.”
That helps to give locations a “treasure hunt” atmosphere, a set-up which also attracts many shoppers to Costco Wholesale outlets.
“Trader Joe’s has a very local customer base and the company’s target is higher middle-class shoppers,” says W. Frank Dell, president of Dellmart & Co., a Stamford, Conn.-based retail consultancy. “The typical Trader Joe’s customers don't shop at the store for all their food needs. But the retailer understands its consumers and it searches for products that the particular segment is interested in.”
Marcia Schurer, president of Culinary Connections, a Chicago-based food marketing and consulting firm, adds that because of stores’ small sizes and brisk activity, most perishables turn daily and are always fresh.
“While some consumers may find Trader Joe’s selections limited, stores still have affordable prices, especially when compared to some of the other higher-demographic retailers that sell specialty and prepared foods, such as Whole Foods,” she notes.
Indeed, Trader Joe’s reports that whenever possible it buys directly from suppliers and “bargains hard to get the best price.”
The retailer adds that unlike most grocers, it doesn’t charge its suppliers fees for putting items on the shelves, which also helps to hold down prices.
Stores also do not have the frills of many other groceries, such as full-service meat, deli and seafood counters.
Instead, proteins are prepackaged, with many meats sold in modified atmosphere packaging.
A suburban Chicago store, for instance, recently was offering four types of case-ready ground beef—80-percent lean, 85-percent lean, 96-percent lean and 85-percent lean organic, for $2.69, $3.69. $4.69 and $6.49 a pound, respectively—as well as two types of ground beef patties: 85-percent organic and 96-percent, for $6.99 and $4.99 a pound.
Steaks include Premium Black Angus Beef Top Sirloin Fillet, Ribeye and New York Strip, for $12.49, $13.49 and $16.99 a pound, respectively.
The most diverse recipes, however, are in the frozen aisles.
Offerings include Stacked Eggplant Parmesan, Pasta in Lemon Cream Sauce with Sockeye Salmon & Asparagus, Rigatoni alla Siciliana, Linguine with Clam Sauce, and Gnocchi alla Sorrentina.
Among the ethnic selections are Chicken Red Mole with White Rice, Pork Masitas (marinated roast pork, black beans with rice and sweet plantains), Chicken Quesadillas with Seasoned Vegetables, Lamb Vindaloo (lamb in curry sauce with basmati rice), Paneer Tikka Masala with Spinach Basmati Rice, and Chicken Tikka Masala with Basmati Rice.
Asian-inspired offerings include Mandarin Orange Chicken, Barbecue Chicken Teriyaki, Tempura Chicken with Sweet & Sour Sauce, Szechuan Style Spicy Beef & Broccoli, and Kung Pao Chicken.
In addition, frozen seafood selections feature Dover Sole, Wild Alaskan Cod Fillet, Tilapia, Premium Salmon Burgers, Fully Cooked Atlantic Salmon, and Coho Salmon Fillets.
The Chicago-area outlet also carries an array of frozen pizzas, including Margherita, Organic 3-Cheese, BBQ Chicken, Roasted Vegetable, and Arugula.
Selections are in 12- to 15.3-ounce packages and are priced from $3.99 to $4.99.
Other frozen items include Roasted Vegetable Multi-Grain Lasagna, Breaded Chicken Breasts and Grilled Chicken Strips.
A sign in the frozen aisle, meanwhile, spotlights newer items in the outlet including Cheese Blintzes, Mini Chipotle Potato Bites (with bacon, sour cream and chives), Mini Blueberry Cheesecake Ice Cream Wedges, Grass-Fed Angus Beef Strip Loin Steak, and Almond Croissants.
Such diverse offerings are helping to attract a cult following, Schurer says.
“Trader Joe’s is appealing to people who love shopping for the unusual selection of quality, specialty foods that they can’t get anywhere else,” she notes.
In addition to its varied perishables SKUs, which also include arrays of specialty cheeses and pre-cut packaged produce, Trader Joe’s also positions customer service as a key competitive differentiator.
Indeed, Schurer notes that stores have well-trained staffers who can answer customers’ food questions.
“Trader Joe’s stays current with the trends, tries to offer exciting foods with great-tasting profiles, and has staffers who go out of their way to make sure customers find what they are looking for and are one-hundred percent satisfied with every item they buy,” she states.
Schurer adds that in order to remain relevant, Trader Joe’s needs to maintain its focus on quality and new and attractive offerings.
“As long as they do that, they will continue to have customers,” she notes.