The Secrets Behind Trader Joe's Low, Low Prices
Ever wondered how Trader Joe's is able to push high-quality products at downright cheap prices? We did a bit of digging to get the secrets behind their bargains.
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It's no secret we're obsessed with Trader Joe's. From the fragrant flowers that greet you at the door to the displays of seasonal snacks, a trip to this California-based grocery chain feels like a treat, rather than a chore.
We know we're not alone. Step into a store on any weeknight after work, and the aisles are packed. Indeed, Trader Joe's has created a true fan base for its quality products, which are sold at incredibly low prices.
How exactly is Trader Joe's so cheap? The chain is notoriously tight-lipped on the specifics of its cost-saving practices, so we did a bit of digging and came up with four key ways Trader Joe's keeps its prices so low while keeping such loyal customers.
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1. Brand-Name Products at Private-Label Prices
Nearly all of the products in Trader Joe's stores are wrapped with in-house branding, complete with unique names and custom art. Instead of Oreos, you'll dunk Joe-Joe's in milk. Instead of Swedish Fish, you'll nosh on Scandinavian Swimmers. Cheddar Goldfish fans should look for Cheddar Rockets.
Here's why that matters to the prices you pay: Trader Joe's buys its products directly from suppliers, cutting out the middlemen and associated costs.
Second, about 90 percent of products in stores are private-label, compared to just 16 percent across the supermarket industry. This all but eliminates competition, which can hike up costs for manufacturers and prices for consumers.
Lastly, the company avoids paying slotting fees, a surcharge grocery stores can bill manufacturers for prime placement on supermarket shelves. Slotting fees drive up the cost for the manufacturer, which in turn drives up the end price for the consumer.
It's no secret that Trader Joe's products are purchased directly from brand-name suppliers. What is a secret, however, is which suppliers they keep in their lineup. The store's been notoriously mum on the subject, though that hasn't stopped some internet sleuths from finding some seemingly spot-on matches. (Google "Trader Joe's brand names" if you're curious.)
By eliminating brand competition from its stores, Trader Joe's skips the pricing games and fills the shelves with high-quality products at a significantly lower cost. What's not to love?
2. Limited and Unconventional Marketing and Ads
Think about the last time you saw an commercial for Trader Joe's. You've likely never seen one.
Trader Joe's uses unconventional marketing strategies limited mostly to social media and the Fearless Flyer. Instead, it relies on the quality of its products, the competitiveness of its prices and word-of-mouth marketing to do the job a high-paid marketing firm might do for another store or company.
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3. Smaller Stores, Less Choice
Not only does Trader Joe's have a smaller footprint, it also offers fewer choices per square foot than its competitors. Its customers actually prefer this smaller selection. This allows Trader Joe's to stock less than one-tenth the amount of SKUs as a competitor grocery while pulling in twice the revenue per square foot.
A tight footprint with fewer options results in a streamlined shopping experience for customers, and the company keeps its overhead costs low so it can pass those savings to you.
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4. Fewer Employees
This one's pretty simple, but impactful: with a smaller footprint and fewer products, Trader Joe's requires fewer employees. They also don't have many of the custom departments of larger stores, such as bakeries, delis and sushi stations.
That's not to say you'll be wandering the aisles aimlessly with no help to be found. Trader Joe's staff are notoriously helpful, welcoming and knowledgeable. In fact, look out for the endcap with employees' favorite new products. They do a great job highlighting new items you shouldn't overlook.
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