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Trader Joe’s

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This is my presentation on the innovation & growth strategy at Trader Joe's submitted for class in Spring 2009.

Published in: Education, Business
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Trader Joe’s

  1. 1. Dhairav Dalal MOB9525-01 Not yer average Joe
  2. 2. Summary <ul><li>Win at the grocery game by innovation in: </li></ul><ul><ul><li>Marketing </li></ul></ul><ul><ul><li>Business model </li></ul></ul><ul><ul><li>Product </li></ul></ul><ul><li>Build a sustainable business through investments in: </li></ul><ul><ul><li>Resources </li></ul></ul><ul><ul><li>Processes </li></ul></ul><ul><ul><li>Values </li></ul></ul><ul><li>Highest per sq ft revenue amongst supermarkets </li></ul><ul><li>2 nd best supermarket chain in the United States </li></ul>
  3. 3. Not a great start <ul><li>Started in 1958 by Joe Coulombe as Pronto Markets </li></ul><ul><li>Competed with convenience stores like 7-Eleven </li></ul>
  4. 4. Change in strategy <ul><li>Began to differentiate by offering “the world’s largest selection of alcoholic beverages” 1 </li></ul><ul><li>Started developing private label around this time </li></ul><ul><li>First Trader Joe’s opened in 1966 </li></ul><ul><li>Store selection oriented towards Americans who wanted variety of foods from around the world </li></ul>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 degrees http://www.novusvinum.com/features/trader_joes.html
  5. 5. Innovation at Trader Joe’s Source: Jay Rao Revenue Growth Time Disruptive Innovation Application Innovation Product Innovation Process Innovation Experiential Innovation Marketing Innovation Business Model Innovation Structural Innovation
  6. 6. Marketing innovation <ul><li>A different value proposition: </li></ul><ul><ul><li>“ 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” </li></ul></ul><ul><li>Trader Joe’s created value for the target audience and developed products, promotion & distribution to deliver that value </li></ul><ul><li>While shopping for groceries was mostly a chore, Trader Joe’s created a fun environment to bring in more customers </li></ul>
  7. 7. Innovation in products <ul><li>Between 70-85% revenues are from private label products </li></ul><ul><ul><li>“ Category leaders” travel the globe to find new items; items that are usually not available in other stores </li></ul></ul><ul><ul><li>Work with chefs to find ways to mass produce </li></ul></ul><ul><ul><li>“ Tasting panel” tries the new item before it is approved to mass produce </li></ul></ul><ul><ul><li>No market research; if consumers don’t buy, then item is taken off the shelves </li></ul></ul><ul><li>Have fun with private label: </li></ul><ul><ul><li>Trader Darwin is the label for vitamins and the tagline is “Survival of the Fittest” </li></ul></ul>
  8. 8. Innovation in promotion <ul><li>Trader Joe’s does not provide any discounts or coupons like the other supermarkets </li></ul><ul><li>Quirky promotional materials include </li></ul><ul><ul><li>In-store billboards describing the products </li></ul></ul><ul><ul><li>Frequent Flyer newsletter announcing new products </li></ul></ul><ul><ul><li>Online recipes which use Trader Joe’s products </li></ul></ul>
  9. 9. In store promotions
  10. 10. Promotion newsletter
  11. 11. Online recipes
  12. 12. Innovation in distribution <ul><li>Cost savings: </li></ul><ul><ul><li>Source products directly from manufacturers </li></ul></ul><ul><ul><li>Cut out middlemen </li></ul></ul><ul><ul><li>No stocking fees </li></ul></ul><ul><li>Develop products in partnership with chefs for the mass market </li></ul>
  13. 13. Business model innovation <ul><li>Costs savings </li></ul><ul><ul><li>Source directly from manufacturers, no middlemen implying savings in cost </li></ul></ul><ul><ul><li>No shelf-stocking fees 2 </li></ul></ul><ul><ul><li>Early contracts for bulk volumes at hard fought bargain prices </li></ul></ul><ul><li>Better utilization of assets </li></ul><ul><ul><li>Lower inventory; fewer than 3000 SKUs compared to 40000 for traditional supermarkets 3 </li></ul></ul><ul><ul><li>Smaller stores which is a result of lower SKUs and leads to much higher revenues per sq ft (twice as much as any other supermarket 4 ) </li></ul></ul>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.htm 4 http://www.businessweek.com/magazine/content/04_17/b3880016.htm
  14. 14. Trader Joe’s investment in capabilities <ul><li>Resources: </li></ul><ul><ul><li>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 plan 5 </li></ul></ul><ul><li>Processes: </li></ul><ul><ul><li>No market research, but vital taste tests followed by product development </li></ul></ul><ul><li>Values: </li></ul><ul><ul><li>Focus on quality, variety and cost of products </li></ul></ul><ul><ul><li>Make shopping a fun experience (Evident in how employees dress up and from the promotional material) </li></ul></ul>pay for entry-level part-timers starts at $8 to $12 an hour; first-year supervisors average more than $40,000 a year 5 http://www.businessweek.com/magazine/content/04_17/b3880016.htm
  15. 15. Conclusion

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