trader joe’s
DESCRIPTION
This is my presentation on the innovation & growth strategy at Trader Joe's submitted for class in Spring 2009.TRANSCRIPT
Dhairav DalalMOB9525-01
Not yer average Joe
SummaryWin at the grocery game by innovation in:
MarketingBusiness modelProduct
Build a sustainable business through investments in:ResourcesProcessesValues
Highest per sq ft revenue amongst supermarkets
2nd best supermarket chain in the United States
Not a great startStarted in 1958 by Joe Coulombe as Pronto
MarketsCompeted with convenience stores like 7-
Eleven
Change in strategyBegan to differentiate by offering “the
world’s largest selection of alcoholic beverages”1
Started developing private label around this time
First Trader Joe’s opened in 1966 Store selection oriented towards Americans
who wanted variety of foods from around the world
1 Joe discovered a high correlation between years of education and alcoholic consumption and chose to target the relatively small group of people with college degreeshttp://www.novusvinum.com/features/trader_joes.html
Innovation at Trader Joe’sR
evenue
Gro
wth
Time
DisruptiveInnovation
ApplicationInnovation
ProductInnovation
ProcessInnovation
ExperientialInnovation
MarketingInnovation
Business ModelInnovation
StructuralInnovation
Source: Jay Rao
Marketing innovationA different value proposition:
“For the middle income educated consumer who likes variety of foods from around the world, Trader Joe’s offers the best in quality gourmet cuisines at a low, affordable price”
Trader Joe’s created value for the target audience and developed products, promotion & distribution to deliver that value
While shopping for groceries was mostly a chore, Trader Joe’s created a fun environment to bring in more customers
Innovation in productsBetween 70-85% revenues are from private label
products“Category leaders” travel the globe to find new
items; items that are usually not available in other stores
Work with chefs to find ways to mass produce“Tasting panel” tries the new item before it is
approved to mass produceNo market research; if consumers don’t buy, then
item is taken off the shelvesHave fun with private label:
Trader Darwin is the label for vitamins and the tagline is “Survival of the Fittest”
Innovation in promotionTrader Joe’s does not provide any discounts
or coupons like the other supermarketsQuirky promotional materials include
In-store billboards describing the productsFrequent Flyer newsletter announcing new
productsOnline recipes which use Trader Joe’s
products
In store promotions
Promotion newsletter
Online recipes
Innovation in distributionCost savings:
Source products directly from manufacturersCut out middlemenNo stocking fees
Develop products in partnership with chefs for the mass market
Business model innovationCosts savings
Source directly from manufacturers, no middlemen implying savings in cost
No shelf-stocking fees2
Early contracts for bulk volumes at hard fought bargain prices
Better utilization of assetsLower inventory; fewer than 3000 SKUs
compared to 40000 for traditional supermarkets3
Smaller stores which is a result of lower SKUs and leads to much higher revenues per sq ft (twice as much as any other supermarket4)
2 http://www.traderjoes.com/value.html 3 http://www.consumerreports.org/cro/money/shopping/where-to-buy/supermarkets-10-06/overview/1006_supermarkets_ov1.htm4 http://www.businessweek.com/magazine/content/04_17/b3880016.htm
Trader Joe’s investment in capabilitiesResources:
Besides above-union wages and generous bonuses, Trader Joe’s contributes an additional 15.4% of each worker's gross pay into a company-funded retirement plan5
Processes:No market research, but vital taste tests followed
by product developmentValues:
Focus on quality, variety and cost of productsMake shopping a fun experience (Evident in how
employees dress up and from the promotional material)
pay for entry-level part-timers starts at $8 to $12 an hour; first-year supervisors average more than $40,000 a year5 http://www.businessweek.com/magazine/content/04_17/b3880016.htm
Conclusion