Trader Joe’s vs. Whole Foods Market
MIT Students
Trader Joe’s vs. Whole Foods Market: A Comparison of Operational Management
15.768 Management of Services: Concepts, Design, and Delivery
1
Grocery shopping is more diversified and evolved than ever before. Individuals across the nation have access to everything from exotic products to unique delivery services. Often, specialty stores have limited locations whereas specialty services have a limited reach. However, two retailers have expanded to hundreds of locations while adhering to unexpected market positioning for previously untargeted market segments. Whole Foods Market and Trader Joe’s have become household names while also innovating beyond regional and national traditional chains. Despite comparable size in terms of locations, each store’s growth has operated using a very different model. This document will address the various facets for both Whole Foods Market and Trader Joe’s in order to understand how each business model has won a piece of the market pie and share of wallet. Whole Foods Market Background and History In 1978, John Mackey had a vision to build a store that would meet his desire for whole, natural foods as part of the movement away from artificial, processed foods. Mackey was a college dropout, but against all odds he was able to borrow $45,000 in capital financing and open his first store for what would become Whole Foods in Austin, Texas.1 By all accounts it has been an incredible success and the most recent annual report (2009) reveals that there are 284 stores across most of the United States with a handful in Canada and Great Britain.2
2009 Sales (000s)
1 2
2008
2007
2006
$8,031,620 $7,953,912 $6,591,773 $5,607,376
http://www.wholefoodsmarket.com/company/history.php Whole Foods Market Annual Report (2009), pg. 3
2
# of Stores Store Size (sq.ft.)
284 37,000
275 36,000 $570,000
276 34,000 $617,000
186 34,000 $593,000
Weekly Sales (/store) $549,000
To best understand
Trader Joe’s vs. Whole Foods Market: A Comparison of Operational Management
15.768 Management of Services: Concepts, Design, and Delivery
1
Grocery shopping is more diversified and evolved than ever before. Individuals across the nation have access to everything from exotic products to unique delivery services. Often, specialty stores have limited locations whereas specialty services have a limited reach. However, two retailers have expanded to hundreds of locations while adhering to unexpected market positioning for previously untargeted market segments. Whole Foods Market and Trader Joe’s have become household names while also innovating beyond regional and national traditional chains. Despite comparable size in terms of locations, each store’s growth has operated using a very different model. This document will address the various facets for both Whole Foods Market and Trader Joe’s in order to understand how each business model has won a piece of the market pie and share of wallet. Whole Foods Market Background and History In 1978, John Mackey had a vision to build a store that would meet his desire for whole, natural foods as part of the movement away from artificial, processed foods. Mackey was a college dropout, but against all odds he was able to borrow $45,000 in capital financing and open his first store for what would become Whole Foods in Austin, Texas.1 By all accounts it has been an incredible success and the most recent annual report (2009) reveals that there are 284 stores across most of the United States with a handful in Canada and Great Britain.2
2009 Sales (000s)
1 2
2008
2007
2006
$8,031,620 $7,953,912 $6,591,773 $5,607,376
http://www.wholefoodsmarket.com/company/history.php Whole Foods Market Annual Report (2009), pg. 3
2
# of Stores Store Size (sq.ft.)
284 37,000
275 36,000 $570,000
276 34,000 $617,000
186 34,000 $593,000
Weekly Sales (/store) $549,000
To best understand