Trader Joe’s

Dhairav DalalMOB9525-01

Not yer average Joe

SummaryWin at the grocery game by innovation in:

MarketingBusiness modelProduct

Build a sustainable business through investments in:ResourcesProcessesValues

Highest per sq ft revenue amongst supermarkets

2nd best supermarket chain in the United States

Not a great startStarted in 1958 by Joe Coulombe as Pronto

MarketsCompeted with convenience stores like 7-

Eleven

Change in strategyBegan to differentiate by offering “the

world’s largest selection of alcoholic beverages”1

Started developing private label around this time

First Trader Joe’s opened in 1966 Store selection oriented towards Americans

who wanted variety of foods from around the world

1 Joe discovered a high correlation between years of education and alcoholic consumption and chose to target the relatively small group of people with college degreeshttp://www.novusvinum.com/features/trader_joes.html

Innovation at Trader Joe’sR

evenue

Gro

wth

Time

DisruptiveInnovation

ApplicationInnovation

ProductInnovation

ProcessInnovation

ExperientialInnovation

MarketingInnovation

Business ModelInnovation

StructuralInnovation

Source: Jay Rao

Marketing innovationA different value proposition:

“For the middle income educated consumer who likes variety of foods from around the world, Trader Joe’s offers the best in quality gourmet cuisines at a low, affordable price”

Trader Joe’s created value for the target audience and developed products, promotion & distribution to deliver that value

While shopping for groceries was mostly a chore, Trader Joe’s created a fun environment to bring in more customers

Innovation in productsBetween 70-85% revenues are from private label

products“Category leaders” travel the globe to find new

items; items that are usually not available in other stores

Work with chefs to find ways to mass produce“Tasting panel” tries the new item before it is

approved to mass produceNo market research; if consumers don’t buy, then

item is taken off the shelvesHave fun with private label:

Trader Darwin is the label for vitamins and the tagline is “Survival of the Fittest”

Innovation in promotionTrader Joe’s does not provide any discounts

or coupons like the other supermarketsQuirky promotional materials include

In-store billboards describing the productsFrequent Flyer newsletter announcing new

productsOnline recipes which use Trader Joe’s

products

In store promotions

Promotion newsletter

Online recipes

Innovation in distributionCost savings:

Source products directly from manufacturersCut out middlemenNo stocking fees

Develop products in partnership with chefs for the mass market

Business model innovationCosts savings

Source directly from manufacturers, no middlemen implying savings in cost

No shelf-stocking fees2

Early contracts for bulk volumes at hard fought bargain prices

Better utilization of assetsLower inventory; fewer than 3000 SKUs

compared to 40000 for traditional supermarkets3

Smaller stores which is a result of lower SKUs and leads to much higher revenues per sq ft (twice as much as any other supermarket4)

2 http://www.traderjoes.com/value.html 3 http://www.consumerreports.org/cro/money/shopping/where-to-buy/supermarkets-10-06/overview/1006_supermarkets_ov1.htm4 http://www.businessweek.com/magazine/content/04_17/b3880016.htm

Trader Joe’s investment in capabilitiesResources:

Besides above-union wages and generous bonuses, Trader Joe’s contributes an additional 15.4% of each worker's gross pay into a company-funded retirement plan5

Processes:No market research, but vital taste tests followed

by product developmentValues:

Focus on quality, variety and cost of productsMake shopping a fun experience (Evident in how

employees dress up and from the promotional material)

pay for entry-level part-timers starts at $8 to $12 an hour; first-year supervisors average more than $40,000 a year5 http://www.businessweek.com/magazine/content/04_17/b3880016.htm

Conclusion