While other, larger grocery chains have raised prices over the last year, Trader Joe’s has kept its smaller selection relatively unchanged—and still profited handsomely.
Key Details
- In 2020, grocery chain Trader Joe’s gross average revenue per square foot was about $2,130—nearly double its competitors.
- Prices at Trader Joe’s have held relatively steady compared to other grocery stores. For example, bananas in the store have had the same price for about 25 years—just 19¢ per banana.
- Trader Joe’s has also been consistently ranked as the grocery store with the highest-rated customer satisfaction, yet it sells fewer products and has smaller stores than its competitors, The Wall Street Journal reports.
- The grocery store has established a loyal customer base by keeping its prices low and its inventory attractive to shoppers.
- Since its founding in 1958, Trader Joe’s has opened 561 stores in 42 states plus the District of Columbia. The company has annual revenue of $13 billion.
Why it’s news
Unlike other big-name brands, Trader Joe’s predominantly sells its own private-label products. The chain is known for selling rarely known goods, often foods popular outside the American market. By selling foods outside of what the shopper typically sees, Trader Joe’s customers keep coming back to see what’s new.
Over the years, the grocery chain has cultivated a loyal customer base. These customers appreciate the unusual products and competitive prices in the store. Trader Joe’s smaller selection can also be considered more of a benefit than a downside.
By keeping product options limited, customers can have a faster, more efficient shopping experience. Rather than choosing between dozens of bread brands, a Trader Joe’s customer has only a couple to select from.
Consistently lower prices are another major draw for the company. It manages to keep prices down by cutting out the middleman and working with suppliers itself. Trader Joe’s also frequently buys products in bulk and tends to make foreign purchases with local currency, giving the store greater negotiating power with the supplier, The Wall Street Journal reports.
Trader Joe’s loyal customer base also helps the company cut down on advertising costs. While the grocery store does little marketing itself, its fans tend to frequently promote the products they find on social media.
The company also keeps products moving on the shelves. If a product is not selling well, it simply removes the option from the store. Customers keep coming back to find what is new and exciting on the shelves.
Backing up a bit
Walmart is pushing back against high prices from suppliers, telling the distributors that it can no longer continue price hikes. Price variations, even by just a few cents, can send Walmart shoppers looking elsewhere since the company promotes its “Everyday Low Price” policy.
Last year, the retailer had to raise prices on products such as milk, detergent, and frozen meals as shipping costs and raw material prices rose. Now that costs such as transportation and cardboard shipping cases have declined significantly, Walmart is pushing back against more price hikes.
As consumers are less willing to pay inflated prices, Walmart is growing more hesitant to pass costs on to its shoppers.
