Introduction
Trader Joe’s is a grocery stores network which was founded in 1967 by Joe Coulombe. The company targeted sophisticated customers and aimed to offer unique goods and service. In the 1970s the company transitioned to the private label goods. Presently, 80% of the stock in the stores consists of proprietary label foodstuffs. The stores used a South Seas theme and the employees were referred to as “crewmembers.” The founder avoided traditional means of advertising and relied almost exclusively on the company newsletter. Trader Joe’s was acquired by a German businessman Theo Albrecht in 1979. It remained largely autonomous with Coulombe retaining the CEO position.
The company expanded outside Southern California only in 1988 when John Shields became a new leader. Currently, the network covers 37 states with 414 stores across the US. Under the guidance of Dan Bane, Trader Joe’s continues to utilize its tried-and-true operations model. The company’s buyers hunt for unusual and exotic goods from all over the world keeping the consumers interested. Stores employ educated young workers who are able to create a pleasant and welcoming atmosphere for the returning customers. However, maintaining a “local market” image becomes increasingly difficult as the company grows. The dominant players in the supermarket industry – Wal-Mart, Kroger, Safeway, and Supervalu – start to encroach on the network’s core demographic. The market continues to grow, and those companies seek to expand their influence through smaller scale stores which will directly compete with Trader Joe’s. The situation remains stable for the time being with experts estimating a steady growth for the company, but the need to maintain the competitive advantage becomes more dire each year.
Internal Factors
With the IFE score of 2.27, Trader Joe’s demonstrates a below average ability to respond to the internal factors affecting its performance. The company focuses on a few significant strengths like unique, high-quality goods, competitive prices, and lucrative job offers. At the same time, some highly urgent issues seem to go unnoticed. The network still has zero social media presence despite having multiple fan clubs and support groups. It also ignores the new technology, the marketing potential of the customer loyalty programs, remains extremely secretive, and does not target new audiences. The company only stocks a limited assortment of goods and regularly replaces some of those, putting it at a sizeable disadvantage compared to the larger stores. One of the key major strengths of the company is the quality and pricing of the goods. By avoiding external brands and stocking high quantities of each product, the company manages to maintain quality and keep the prices down which has become one of the main reasons for its popularity.
This was weighted 0.14, a high sense of urgency, since the company needs to focus a lot of effort on working with the suppliers and keeping ahead the competition. Another major strength is high employee satisfaction. The company was repeatedly named one of the best companies to work for by the sites like Glassdoor.com. Interviewed employees also report the work to be satisfying and feeling empowered to keep the customers happy. This factor was weighted 0.04, low urgency, since it does not seem like the company has trouble keeping the workers satisfied. By using a simple employment policy of hiring educated people unable to find jobs, Trader Joe’s ensures a friendly workplace atmosphere and encourages the employees to socialize. They retain their workers by offering a solid paycheck and granting some benefits even to the part-timers. All of these mechanisms do not require constant attention and regulation. A major weakness of the network is its inability to adopt new technologies fast enough.
Many stores still use bells for internal communication and have no self-checkout lanes or flat-screen cashier displays. These problems create long queues during busy weekend hours and leave the customers dissatisfied. The factor was weighted 0.12, high urgency. The lack of technological advancement clearly affects consumer satisfaction and overall shop efficiency. It is crucial for the company to embrace new advancements if it is going to stay in the market. Another major weakness, which is probably hurting Trader Joe’s the most, is the lack of social media presence. This particular marketing channel is becoming increasingly important each year. Not to mention, most of the network’s core demographic are infatuated with innovation. This was weighted 0.15, an extreme sense of urgency. Without addressing the issue, Trader Joe’s will be at a serious disadvantage compared to the companies which do not ignore SMM. The firm also misses out on a convenient opportunity to receive consumer feedback.
External Factors
Trader Joe’s received an EFE score of 2.67. It represents the company being able to adapt well to the external factors. The network has a lot of opportunities in the market. It can utilize new ways of advertising, new technologies, and the customer loyalty to expand and develop. However, the business presents various threats as well. The competition continues to grow. The stores are starting to lose their “local market” appeal, and the reveal of the supply channels can jeopardize the whole operation. One of the major opportunities for Trader Joe’s is the customer loyalty the network maintains. With fans all across the country, it is easy to expand into new markets and generate the media buzz around the products. This was weighted 0.15, a high sense of urgency, since keeping the love of the customers is one of the major focuses of the company and its refusal to address the buyers more directly results in many concerns going unanswered. Another major opportunity is the new technology which constantly appears in the retail industry. While maintaining the appeal as a “friendly local store” might become difficult, this can be compensated by exciting the core demographic of young intellectuals with innovation. Services like dedicated mobile apps and drone delivery can gain the public attention in a new way.
The network has an opportunity to create a new tech-savvy image or even engineer a completely unique style merging futuristic technology with a familiar “neighborhood store” feel. This was weighted 0.11, high urgency, since new technology is essential to maintaining a competitive level of service and keeping the consumers interested. The biggest major threat for the company is growing competition. Trader Joe’s success has attracted a lot of attention to their business model. Wal-Mart is experimenting with the format and had considerable success with their Express stores. With huge companies contesting the customer base, it can be difficult to stay in business. This was weighted 0.15, very high urgency, since the company is very static which means adapting to the new market realities can be difficult for it.
Trader Joe’s must create a contingency plan for the future which will ensure customer retention in the face of increasing competition. The risk of the supplier network reveal presents a minor but considerable threat to Trader Joe’s. The company relies on the exclusive agreements to acquire goods at considerably lowered prices. The past investigations have revealed connections between Trader Joe’s and some major production companies, including PepsiCo. If such agreements are exposed, they most likely will be terminated due to the pressure of the competitors. This threat was weighted 0.07, an average sense of urgency. There are no current investigations into the company and it managed to keep its secrets closely guarded for decades. However, it should be said that consumers value honesty and being more public on less important questions can be beneficial for the network.
I/E Matrix Analysis
The company has scored 2.47 overall, which places it in the sector V of the I/E chart. That indicates that the network should follow a relatively conservative course aimed at market penetration and maintaining its competitive advantage. Trader Joe’s can achieve those goals by embracing new marketing techniques and technologies. The company should focus on the social networks which are becoming increasingly more important as a marketing tool and a way to gather customer feedback. New advancements in the technology should also be taken into consideration. Without self-checkouts and advanced cashier computers the company fails to provide customer service on par with the competition. The network is focused on providing a compelling shopping experience for the intellectuals, and new tech will help keep the consumers interested. Combined with the efficient operations strategy already existent within the network these advancements will ensure the continued success of Trader Joe’s.