Trader Joe’s Competitive Advantage

Trader Joe’s Competitive Advantage Trader Joe’s strategy diamond is as follows: Arenas Trader Joe’s is active in is urban areas with colleges to attract their main customer base, intelligent, educated health conscious people who enjoy trying new things. They offer organic and non-GMO products that are highly selective with over 80% being private-label. Multiple new products are introduced weekly, replacing current products, creating a limited supply offering. Stores are smaller with an open faced layout. They strive in customer service where they rely on their employees to create a happy, engaging, and adventurous environment. Vehicles that Trader Joe’s utilize are focused internally. Internal development is important (though financially it is unknown if they solely finance their growth), especially when it comes to how each store operates. Each store operates like it is its own business. Forecasting, budgeting, planning, is all done by each store. Differentiators at Trader Joe’s are all about its low prices, unique products, and “quirky” culture. Prices tended to be lower because of the relationship Trader Joe’s has with its suppliers, who they buy directly from. They cut out the middle man and in turn pass on those savings to their customers. Trader Joe’s also does not have a wide selection of different products. They want the customers to experience a treasure hunt while shopping by offering multiple new products weekly that replace older products. Their limited supply of products is much different than a typical grocery store. Trader Joe’s selection of store brands is much higher than other competitors. This alone offers different and unique products to their customers, while offering products that you do not normally see elsewhere. Staging at Trader Joe’s a slower process than a normal grocery store. Even with a demanding fan base drawing up groups on social media accounts, Trader Joe’s is selective on the area they want to open. This slower expansion is good for their limited look. Trader Joe’s is an experience because it is not on every corner or in every town. It is new and exciting and this adds value to its unique and quirky environment. “We want what we cannot have”. Economic Logic at Trader Joe’s is to offer lower prices for their unique, yet limited products. Through direct supplier relationships and constant product introduction, they are able to keep customers happy and returning. Even when some products are not the lowest, the customer service outperforms many of their competitors due to their internal operations and training. Trader Joe’s does have a competitive advantage, low prices and unique products, especially private label products. It is not so much as other stores do not have similar products, it’s the quantity that keeps customers coming back to Trader Joe’s. Every week is different, and since they replace older items with newer ones, they do not have a huge inventory. This allows them to offer so many different products. They do not follow trends are constantly searching for different products. Yes, you cannot buy major brands at Trader Joe’s but you also cannot find their private label at any other store as well. They know their customers well, what they wants, who they are. They know they want something new and exciting, meaning their weekly new products give them an advantage over their competitors. A critical capability that makes up Trader Joe’s competitive advantage is a secondary activity of the value chain, Procurement. Trader Joe’s acquire their products through a secret relationship with suppliers and allows them to directly buy from them. In the most simplistic way, its inbound logistics directly give their customers the low prices they love. Their relationship with suppliers, skipping the middle man, and constant replacement and introduction of new products is the primary activity of Trader Joe’s value chain that gives them their competitive advantage. Some more capabilities that contribute to their strengthen their competitive advantage is service (primary activity), in the form of their reliable, outgoing, and knowledgeable employees. HR management (secondary activity) directly makes up for these employees, who understand their customer base because they are similar or actually part of their customer base. Trader Joe’s is great at training their employees by training them in all areas of the stores as well as focusing their training on Trader Joe’s culture. Trader Joe’s takes their time in choosing the best employees to fit the culture. All of which add value to their success. Trader Joe’s unfortunately has a couple of capability shortages that can eventually put them behind their competitors. The first being Marketing, which is absent on a large scale. This is a key primary activity that could help them reach their customers outside of the store, with an online presence they can further connect with their customers and fans. This is important because their customer and fan base is heavily involved with social media. The lack of marketing is partly due to keep costs down, by not paying a marketing team, and their lack of technology. As a secondary activity in the value chain, technological development has been put aside at Trader Joe’s. Enhancing their technology, whether it be in the front end or back end of the stores, will only help them understand not only their customers but their inventory, products, operations, better as a whole. A major threat to Trader Joe’s sustainability of its competitive advantage is imitation. Competitors can eventually imitate Trader Joe’s operations and layouts. Another threat is the aggressive competition within the supermarket industry. With low switching costs and substitute products, many competitions are focusing on customer service to attract customers. Another threat is substitute products. Though Trader Joe’s products are unique and changing, many of their competitors are starting to offer small sections of unique, or local products.