How do firms in the supermarket business make money?
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Since the foundation of Trader Joe’s company, there were a few key strategies that it was following to attract many customers, earn more money, and differentiate itself from the competitors. Many other companies in the supermarket business were using the following strategies:
- Selling goods at affordable prices
- Opening new stores in the most appropriate locations
- Analyzing customers’ preferences to find the products that the people have never tried
- Introducing new products every week
As it is clear from the data on the most successful supermarket chains in the United States reported in 2012, Trader Joe’s was not the largest one at that period (Ager and Michael 11). Speaking about its grocery sales, they were quite low if compared to those of more than ten companies, especially Walmart. The number of working stores was also lower, and there were a few states such as California and Illinois where the stores were mainly located. Trader Joe’s did not choose the best growth strategy. In general, it was putting stress on searching for new and unusual products whereas other companies were strengthening the focus on making their stores more convenient for the customers and selling all types of essential goods.
What are the key sources of competitive advantage for Trader Joe’s?
Assessing the company’s performance and perspectives, it is necessary to define the sources of its competitive advantage. Speaking about Trader Joe’s, it is important to single out a few working practices allowing the company to act as a competitor for other American supermarket chains. The most important sources of a company’s competitive advantage are connected to products and practices:
- Selling natural and organic foods
- Proposing the goods that are hard to be found in other supermarkets (rare commodities)
- Locating the supermarkets near educational institutions to attract the primary audience (2)
- Introducing newer products and discontinuing some of the previous ones based on buyers’ preferences
- Allowing the customers to try many products before buying them
In the end, the greatest competitive advantage of the chain stores of the discussed company that helps it to remain popular is a wide range of products for vegetarians and other types of food that are scarcely presented in other stores. Due to that willingness to meet the needs of specific groups, Trader Joe’s remains popular among the customers.
If you were to advise the company, what threats would you consider?
If I was supposed to help the company to develop a more effective strategy, I would start by defining the most important threats that have to be paid attention to as soon as possible. Speaking about the threats, I would consider the following:
- Trying to fulfill the needs of specific groups, the company offers a relatively small number of products that can be bought by everyone
- Company’s shops and parking areas for buyers are often seen as badly-designed (5)
- Many former employees of the company claim that they have been unfairly treated at work; such a situation may have a negative influence on the company’s public image (Screiber 2)
Considering these factors, the competitive advantage of the company does not seem to be sustainable, and this is why the company’s yearly income has decreased recently. To improve the situation, I would recommend:
- Pay more attention to teaching managers
- Punish those managers who were found to use unfair practices towards the employees
- Take measures to make the shops more convenient for buyers
Ager, David, and Michael Roberto. “Trader Joe’s.” Harvard Business School Case 714-419, 2013.
Scheiber, Noam. “At Trader Joe’s, Good Cheer May Hide Complaints”. New York Times. 2016.