Trader Joe's Case

Trader Joes

1. Is the supermarket industry attractive or not? What forces/factors appear to have the greatest impact on industry attractiveness?

Attractive Characteristics

Consumer demand shifting toward organic/natural grocery options, which creates market space for new entrants
Most current grocers are very similar and treat groceries as commodities in that they attempt to differentiate themselves on price alone. This means there is space for brave entrepreneurs who believe they can differentiate themselves through other means (i.e. Amazon trying online/home delivery groceries or Trader Joes)
Consumer shifting perception of valuing “one-stop-shop” grocers (i.e. large supermarkets and retail/grocers), to valuing small “quick” stop, and
Below I have included TJ characteristics and divided them between Focused Cost Leadership and Focused Differentiation Strategies, and which taken together make up the integration strategy.

Focused Cost Leadership—in this strategy firms competes on cost to a focused market. Trader Joe’s sells a few unique discount products to a small market segment (i.e. college educated individuals make up 80% of customers). Below are examples of actions adhering to Focused Cost leadership Strategy:

Carry few unique selling units, so less space needed and lest administration costs; also allows to take advantage of bulk purchases
Takes advantage of bulk pricing to buy unique items at a discount
Use private label items to decrease cost of high quality products
Use less than 15,000 sq. ft. of selling space to reduce overhead cost and pass on savings to customers.
Use employees rather than professional actors in radio-commercials to reduce cost
Use employee art work for signage to reduce cost
Refrain from TV ads to reduce cost
Foster close relationships with vendors to achieve better pricing
Spend less on marketing and in store technology
Only sell in stores located in cities with a highly educated
In this case, TJ offers unique and often rare products designed for sophisticated buyers who shop on a bargain. The goal is to create an atmosphere one would expect in the south pacific—ships, Hawaiian shirts, unique/exotic foods and a care free attitude. Below are examples of actions adhering to Focused Differentiation Strategy:

Only sell in stores, and stores only located in cities with a highly educated population, which creates exclusivity for intellectual consumers who like to think of themselves as exclusive
Send purchasers worldwide to find rare products customers have never tried
Store employees wear Hawaiian shirts
Managers are referred to as “Captain” and assistant managers are “First Mates”
Use a bell system rather than an intercom system
Rotate in/out 10-15 items every few weeks to create scarcity and bring customers into contact with more products
Provide top-quality private label products, so customers can experience high-end quality at a discount

3. What are the main threats to Trader Joe's competitive advantage? Is their advantage sustainable?

Threats

Oil prices can significantly increase cost of food products
Exchange rates with international