Trader Joes: Industry Analysis
Trader Joe’s is a grocery store chain label, owned overhead by the German supermarket company ALDI. It operates within the grocery industry, which includes national food retailers, regional supermarket retailers, and small family owned groceries. Trader Joe’s specifically targets the middle-high end food market, selling niche products to consumers looking for premium quality food at a lower price. The Five Forces:
Within the grocery industry, buyers have minimal power. Each buyer is forced to make individual choices, similar to the CEMEX buyers in Mexico. Trader Joe’s leverages control in its own way by using product differentiation. Many of TJ’s products can only be found at TJ’s, such as the peanut butter stuffed pretzels described by the St. Louis lawyer. Buyers are less price-sensitive, willing to pay more for the products unavailable elsewhere. TJ maintains a competitive advantage in controlling buyer power. Suppliers
Within the grocery industry, large suppliers often maintain a large hold on the retailer’s profits. Many suppliers, through sheer size and market dominance can dictate pricing guidelines. Trader Joe’s minimizes the power held by it suppliers through its vertical integration of label management and production. 80% of TJ’s products carry its own label, which means that TJ doesn’t have to deal with the monopoly price bargaining. TJ sources its products on an individual basis, fragmenting its supplier chain and thus yielding the most structural power to itself. TJ maintains a competitive advantage in this department of the five forces. Substitutes
Within the grocery industry, the threat of substitutes is extremely high. There is little to no switch cost for the consumer, since the basic shopping experience remains the same. Furthermore, many of the products available at one grocery store are available at another. This is an industry vulnerability that Trader Joe’s must also deal with. TJ deals with this...
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