Article: Ager, David L., and Michael A. Roberto. “Trader Joe’s.” Harvard Business School Case 714-419, September 2013. (Revised April 2014.)
After reading the article, I summarized 3 resources and capabilities of Trader Joe’s: filtering ability of goods, own brand and operation ability of the outlets.
- 1. Filtering ability of goods
As a high-end food supermarket, the customers of Trader Joe’s are mainly middle class. After analyzing the needs of its target customers, Trader Joe’s spends a lot of money every year to find delicious organic food all over the world. Its shelves are updated frequently, which makes many consumers willing to go to the supermarket to check the latest products more frequently. It is an advantage of Trader Joe’s to have this ability.
Value: With the ability to select goods, Trader Joe’s can always provide customers with high-quality and novel products, and increase consumers’ favorability, thus shaping a better corporate image and attracting more consumers. This is a valuable ability for enterprises, which can enhance their competitiveness.
Rare: Trader Joe’s is a high-end food supermarket. Although many enterprises are imitating the model of their small shops, for Trader Joe’s, it is unique in its confidentiality of supplier information and its ability to select products worldwide.
Imitation: In fact, it is easy to imitate the construction of shops of Trader Joe’s, but more than 80% of their products come from their own brands. In addition, since it does not disclose the information of suppliers and commodity selection personnel, its ability to select commodities in the world is very difficult to imitate. Moreover, after years of operation, it has a deep understanding of the needs of their target customers, and it is difficult for new companies to obtain these data in a short time.
Organization: The good development of Trader Joe’s in recent years is due to its advantages in this respect, that is, it can accurately target the needs of target groups and provide the most suitable products for them.
2. Own brand
Since its inception, Trader Joe’s has always advocated organic food that is affordable to consumers, so more than 80% of its products come from its own brand. After years of development, Trader Joe’s has several sub-brands with different attributes. Thanks to the ability of Trader Joe’s to select goods, customers also have trust in their sub-brands. It has successfully established a “healthy” and “organic” brand image deep in the customers. This is a very important resource for Trader Joe’s.
Value: Since more than 80% of the goods sold by Trader Joe’s come from its own brand, the brand is a very valuable resource for Trader Joe’s.
Rare: Private brand is a rare resource because it does not authorize trademarks or sell its own brand products to other supermarkets.
Imitation: Since Trader Joe’s does not authorize any other seller, it is illegal for any enterprise to copy its own brand.
Organization: Over the years, Trader Joe’s has instilled the concept of “health” of its brand into customers by selling high-quality products from its own brand, and has successfully utilized this resource.
To sum up, its own brand is a sustainable competitive advantage.
3. Operation ability of the outlets
Trader Joe’s outlets are mainly built on the concept of small shops, which has established the image of community supermarkets deep in the customers. Compared with many other supermarkets, its inventory is much smaller, because its target customers are mainly urban people and college students. Its outlets launch 10-15 new products every week, and most of its meat products are frozen foods, which accurately meet the needs of its target consumers. This is because urban people and college students don’t spend much time on cooking, and they are willing to accept new things. The store operation ability of Trader Joe’s is an advantage for it in the competition of high-end food supermarkets.
Value: This kind of store operation ability is valuable for Trader Joe’s, because this operational strategy can minimize its inventory. At the same time, its shelves are placed in a way that accurately meets the needs of its target customers.
Rare: In the United States, in supermarket chains of the size of Trader Joe’s, few have this kind of shelf placement and the high frequency of new products on shelves. The operation ability of its outlets is very remarkable in community supermarkets. Although retail giants such as Target and Walmart have started to set foot in community supermarkets, the decoration style and sales philosophy of their outlets are different from those of Trader Joe’s.
Imitation: Trader Joe’s current business philosophy, goods purchase and supply chain are the result of its long-term operation. Generally speaking, they are the result of Trader Joe’s long-term involvement in high-end retail supermarkets and its unique marketing style. It is very difficult for a new company to imitate these in a short time, because every link of Trader Joe’s influences each other, and without one link, it can’t be as successful as Trader Joe’s.
Organization: Trader Joe’s biggest annual operating expenses are the purchase of goods and the operation of outlets. Trader Joe’s is well aware of the characteristics of its target consumers and requires its employees to establish a stable friendship with customers, so that Trader Joe’s can become customers’ friends and neighbors, so as to further learn customers’ needs. At the same time, a good shopping experience will make more customers willing to share Trader Joe’s with friends, so as to find potential customers for it.
To sum up, the operation ability of the outlets is a temporary competitive advantage.
4. Summary
At present, the main threat of Trader Joe’s is that more and more retailers start to change to small format. Furthermore, Target, Kroger, Giant, Tops, Amazon and Publix all started to launch their own community supermarkets, which is undoubtedly a great threat to Trader Joe’s. Because before this, Trader Joe’s rarely had the opportunity to compete directly with these retail giants; Moreover, because Trader Joe’s products are not particularly complete, as more and more community supermarkets enter the market, Trader Joe’s shortcomings are magnified. Many consumers can’t buy all the goods they need at Trader Joe’s. Therefore, if there is a more comprehensive community supermarket nearby, the shortcomings of Trader Joe’s will be magnified, which will decrease its number of customers to a certain extent. To Trader Joe’s, this is a major threat at present.
I have the following two suggestions for the future development of Trader Joe’s:
- Expand overseas business: Trader Joe’s main market now is North America. With more and more people paying attention to the health of food, and the concept of organic food has spread all over the world, Trader Joe’s advantage is more distinguished. I suggest that Trader Joe’s can try to expand the markets of developing countries, bring its cultural ideas into more markets, and cultivate more target customers. The supply chain of Trader Joe’s is spread all over the world. Therefore, if it expands overseas markets, it will not only gain more market share, but also help it optimize its supply chain network, facilitate more detailed research on products in different regions, and consolidate the characteristics of its own brand.
- Expand online business: Trader Joe’s doesn’t pay much attention to developing online business, so I suggest Trader Joe’s to develop online market. The core advantage of Trader Joe’s is its high-quality products and differentiated ideas. Trader Joe’s own brand is very attractive to its target consumers. Trader Joe’s is mainly a community supermarket, but with the development of e-commerce platform, people are increasingly aware of the convenience of online shopping. The online business of Trader Joe’s can mainly be bundled sales. Because Trader Joe’s target group is middle class and college students, who don’t have much time to cook. With its commodity filtering ability, Trader Joe’s can develop weekly recipes and distribute the foods for these people. For example, the food can be delivered within a few hours by cooperating with delivery platforms such as Uber eat. This service can meet the needs of Trader Joe’s long-term target customers. At the same time, with the development of online business, the disadvantages of Trader Joe’s can be remedied. For example, Trader Joe’s can set up warehouse centers in different areas, thus expanding the variety of goods.
