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Trader Joe’s - Neighborhood Specialty Grocery Store

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Trader Joe’s

-Neighborhood Specialty Grocery Store

Lee, Jong-hyuk

Principles of Management

July 21, 2017


1. Introduction

1.1. Company Overview

1.2. Gap Statement & Research Question

2. Current Situation

2.1. Food Retail Industry & Market Overview

2.2. 3C’s Model Analysis (+Company analysis by Value Chain)

2.3. SWOT Analysis

2.4. Possible Strategies

3. Conclusion

4. Reference

1. Introduction

1.1. Company Overview

Trader Joe’s, the ‘national chain of neighborhood specialty grocery stores’[1], is the American grocery store founded by Joe Coulombe in 1958. It was sold to Albrecht family of Germany, the owner of the Aldi supermarket chain. Now it has about 465 stores and more than 38,000 employees. Trader Joe’s has the vision ‘Providing little adventures to customers by preparing the items that is not easy to find, with reasonable price’[2], which was proposed by Joe Coulombe, and the company is still trying to actualize the vision.

1.2. Gap Statement & Research Question

Even if Trader Joe’s is not the US No.1 Grocery store[3], but because it concentrated on the market of the products that other grocery stores didn’t handle(differentiation strategy), it has been growing steadily and gained the highest satisfaction from its customer[4]. The problem is that the market Trade Joe’s is targeting is about to becoming red ocean as huge companies like Walmart and organic food market leader Whole Food Market and online market leader Amazon is trying to expand their market share. As a result, the part that Trader Joe’s is taking(and can take) is being threatened, so it is important for Trader Joe’s to analyze the environment and check and re-establish the strategy.

So in this paper, I will analyze the external environment and Trader Joe’s itself. And then based on that, I will figure out and suggest the best strategy Trader Joe’s can take to keep its part and even expand it through the part it didn’t have.

2. Current Situation

2.1. Food Retail Industry & Market Overview

According to the International Industrial Classification, food retail is the resale of food mainly to the general public for personal or household consumption or utilization. In short, food retail is the industry that provides food to customers. And according to the statistics, from 2008 to 2015, US food retail industry shows the growth rate of 2.84%,[5] which is higher than the growth rate of 1.23%[6] of US GDP at the same time. Furthermore, US food retail industry is expected to keep growing at the rate above 4%. But as not only size of the total market, but also the number of establishment, which is supplier, is increasing in high speed, the competition in food retail market is getting more intense.

Along with that, there are two major changes in the industry. Firstly, as consumers are realizing the importance of health and environment, demand for food which is good for health and environment-friendly is increasing rapidly. For example, organic food sales exceeded $43 billion last year with the growth rates of 11%.[7] Besides organic food, all kind of healthier and more environment-friendly food are getting more attention from the customers.[8] Secondly, the industry is sharing the flow with the technological development. To be specific, technology is changing the way companies do the business, like many companies are developing online market, and using developed technology during accelerating and analyzing the sales.[9]
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2.2. 3C’s Model Analysis

        From this chapter I will conduct environmental analysis and internal analysis with 3C’s model.        Considering food is item that has inelastic demand because everyone consume food everyday, the customer of the market is increasing as US population is growing and expected to grow.[10] And according to Nielsen’s Global Retail-Growth Strategies Survey, product availability, convenient location and the lower price is the key point for choosing a grocery store.
        Among the total food retail market, Trader Joe’s segmented the market and targeted ‘intelligent, educated, inquisitive individuals’
[11]. In other word, Trader Joe’s is focusing on the customer group that is conscious about health and environment, and like to try new things. From the fact that the education level is getting higher and the number of people who are conscious about health and environment is increasing, we can expect that this segmented market is going to grow, like it did during the past years. As we can infer from the characteristics of the targeted customers, the factors for them to choose the store is not only availability, location and price, but also healthiness, environment-friendly and newness of the product.

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