How Is Trader Joe’s So Cheap and Popular? | WSJ The Economics Of – Transcript

00:00these are bananas obviously they're from Trader Joe's today they cost 19 cents each and about 25 years ago bananas at Trader Joe's cost 19 as of 2020 Trader Joe's gross average sales per square foot was more than double those of other major grocery store chains and it's been ranked the highest rated grocery store for customer satisfaction so how does Trader Joe's

00:27manage to keep prices low while out competing traditional grocery stores by selling fewer products this is the economics of Trader Joe's Trader Joe stores are smaller and they tend to carry fewer items and the vast majority of what they sell is private label when the store first opened in 1967 Trader Joe's founder Joe colom emphasized stocking products that

00:53were unconventional to Shoppers at the time like Dijon mustard and granola in 1979 Trader Joe's was bought by the German discount grocery store chain Aldi Nord and today Trader Joe's has built its image around selling trendy quirky and seasonal items orange chicken pasta sauce from Trader Joe's it helps with fueling the experience for customers people can go and kind of feel

01:20like they're discovering something new and these products have created a large and loyal customer fan base I went to Trader Joe's and I accidentally got I got way too much stuff of course I love Trader Joe's its popularity on social media is helpful for the company because Trader Joe's doesn't do a lot of advertising actually the grocery store doesn't do a lot of things that other grocery stores do there's no loyalty

01:45program no online shopping platform and no Deli counter still the Trader Joe's fan base is strong and they are dedicated they are Mega fans people will sell Trader Joe's products on places like eBay for a much higher price tag than what you would find at the stores Trader Joe's smaller selection can make

02:12the inor shopping experience more efficient for customers according to psychologist and Professor Barry Schwarz for example instead of having to pick between many different brands of tomato sauce at a conventional grocery store customers at Trader Joe's can quickly select one from its more limited options by selling a small selection of house Brands Trader Joe's can control its own supply chain which it says brings down

02:38prices Trader Joe's items tend to be cheaper because they buy directly from producers and manufacturers whenever they can so this Cuts costs that would typically go to the middleman and the company says they are able to pass that along to Shoppers Traders Joe's says it buys in bulk and often pays for items

03:03upfront whenever possible from suppliers this all helps lower prices the grocery store chain also says it pays for some products like Dijon mustard in local currency so if the currency fluctuates Trader Joe's takes on the risk not the supplier and by assuming the risk Trader Joe's says it can negotiate better prices with suppliers this control over its products and supply chain means

03:29Traders Joe's can easily add and remove items from its shelves one of the unique things about Trader Joe's is they're constantly changing their shelves if products aren't selling as well as they thought they would they remove them from their shelves to make room for something better some grocery stores charge Brands various marketing fees to stock products but Trader Joe's says it only makes

03:56money when customers make a purchase so according to Trader Joe's this incentivizes it to only stock products that customers like from JoJo's sandwich cookies to kungpow chicken there isn't really another chain that does what they do there are other Discounters that sell for cheaper but you're not going to find the Innovation and and the fun products

04:20there the traditional grocery stores have tried to go that route but Trader Joe's is Trader Joe's