Retail Branding and Positioning

Part II

Case Study: Trader Joe’s

Solution Draft

Question 1
According to you what is the consumer’s associative network for Trader
Joe’s ?

Obviously, the students will draw very different associative networks and
everyone can be right. However, they should contain some of the terms and
concepts that are included in this figure:

Question 2
On the one hand Trader Joe’s wants to be perceived as the neighbourhood
specialty grocery store but on the other the company is constantly growing
and opening new locations. Explain the main challenges faced by Trader
Joe’s in maintaining the neighbourhood store image.

Trader Joe’s is faced with a number of challenges. First of them is “how to

maintain the eclectic, friendly vibe that has garnered it legions of faithful
shoppers, while expanding at a brisk pace” (Li 2011).

The retailer is not only increasing the number of store locations but also it is

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expanding their size, for example in La Crescenta- the store was re-located to
a newly built location in Monrovia, which “boasts more spacious aisles,
higher ceilings and a trim brick-and-glass exterior” (Li 2011). The consumers
have voiced concerns and mixed feelings about the move claiming that the
new site is uncomfortable and that it “lacks the offbeat charm they've come
to expect from Trader Joe’s” some said that the new building “doesn't square
with what Trader Joe’s is in my head" or that they are upset about not having
a homey feel in the store (Li 2011).

Secondly, Trader Joe’s strives for their shops to be perceived as mom-and-pop

(Bellona et al. 2010). Oxford dictionary (2015) defines mom-and-pop stores
as “owned and run by a husband and wife, or by a family”. Kowitt (2010)
explains that creating the mom-and-pop image as you grow is challenging
because the store expands to new markets and opens new locations but at
the same time it must maintain the small-store vibe with the customers.
Therefore, given the increased number of location and increasing size of the
stores, the strategy seems not to be in sync with the image (Bellona et al.
2010). On the one side the consumers understand that there is a need for
corporate expansion but on the other side the company is running a risk of
alienating the consumers, who were loyal to the company for many years
and who do not like the idea of shopping in larger stores (Li 2011).

According to some employees, the company has already lost its quirky cool.
“In the early days we never tried to be the neighbourhood store,” says a
former employee. They didn’t have to, Trader Joe’s was the neighbourhood
store. “And yet walk into the Chelsea location on a busy weekday night and
you’ll see something you almost never see in Manhattan: strangers chatting
with one another. Veteran customers tell newbies what products they abso-
lutely have to try, and serious cooks share tips on how to spike sauces and
semi-prepared foods to make them even tastier.” If Trader Joe’s manages to
maintain this kind of mojo, it could end up the biggest neighbourhood store
ever (Kowitt 2010).

Thirdly, while increasing the size, the company is also running a risk of not
finding suitable employees who will convey the message of adventure and
‘aloha spirit’ to customers, while providing an excellent service. In an inter-
view former employee states that “the company is becoming more and more
corporate as it grows and it is beginning to have an impact on the enjoyabil-
ity of being a part-time "crew member"” (Huffington Post 2011).

The retailer’s mission is to become the nationwide chain of neighbourhood

grocery stores (Li 2011) yet the strategy seems to put retailer’s credibility in
question (Bellona et al. 2010). However, as Kowitt (2010) states “Trader Joe’s
may be one of the few retailers to marry cult appeal with scale”.

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Question 3
From a retail branding perspective, analyse the strengths, weaknesses,
opportunities and threats (SWOT) for Trader Joe’s.

Strengths

◼ Employees who strengthen the brand: Trader Joe’s is an attractive employ-

er and the company experiences very low turnover rates. Due to the fact
that the retailer offers very good working conditions (see the case study) it
benefits from a large pool of potential employees. The company can select
individuals who are enthusiastic, positive and who convey the company
image to the consumers, hence strengthening the image of Trader Joe’s.

◼ Management: Promotions are from within the company. Therefore, the

managers are familiar with the company culture and can encourage it
among the employees.

◼ Low cost and high quality retailer with unique products: The merchandise
in-store consists of 80 per cent of private label products, with products
from all over the world, which cannot be found in other stores. The quality
is comparable with the quality of the national brands, for lower prices.

◼ Unique shopping atmosphere: For years, the stores have kept their identi-
ty. The employees are wearing Hawaiian shirts and they hand out samples
of food and drinks which makes shopping more of a fun adventure than a
chore.

◼ Giving back to the community: Each store is unique as the signs are paint-
ed by a local artist, hence the brand is perceived as a friendly neighbour-
hood store.

◼ Frequent rotation of product mix: New products are introduced frequent-

ly, which encourages customers to visit Trader Joe’s more regularly. As the
case study has pointed out, the items which do not sell well are taken off
the shelves, hence the shelves are stocked with only the best selling prod-
uct lines.

◼ Perception of a healthy brand: The company states that in their products

there are no artificial flavours, preservatives, no synthetic colours, no MSG,
no genetically modified ingredients and no artificial trans-fats.

◼ Responsive to consumer needs: Trader Joe’s withdrew from the shelves

single ingredient products from China such as garlic, frozen oganic spin-
ach or ginger after consumers voiced their concerns about the quality.

◼ Convenient locations: Trader Joe’s enjoys an image of a friendly neigh-

bourhood store, that is located in many neighbourhoods.

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Weaknesses

◼ Poor social media presence: Thec company does not engage in social me-
dia marketing. In fact, the company uses very limited amount of advertis-
ing. The primary advertising of Trader Joe’s is done with the use of the
Fearless Flyer, which is published three times a year.

◼ Limited product selection: The company’s stores sell a more limitied prod-
uct mix than traditional supermarkets, selling only around 3,500 SKUs at
one time, compared to over 55,000 SKUs in the average supermarket.

◼ Geographical concentration: As the case study pointed out, Trader Joe’s

stores are still mainly located California, the Chicago region and some East
cost states. Furthermore, the stores are situated away from the prime loca-
tions. Therefore, in order to keep up with the competition, the company
could open larger, more centralized stores. In fact, the New York City store
opening in 2006 was a major success. [this can also be perceived as an Op-
portunity]

◼ Product recalls have affected the brand image a few times. In the recent
past, the company had to recall several of the products that were sold un-
der its house brand. In the beginning of this year, Trader Joe’s recalled five
varieties of raw walnuts due to potential salmonella contamination. A re-
call that began with Trader Joe’s peanut butter in 2012 has become one of
the largest food recalls in U.S. history (Bonar 2015).

Opportunities

◼ Increase the advertising spending- on-line and off-line (currently it is at 0.2

per cent of sales) and engage customer’s more in the adventure that Trader
Joe’s takes them on while coming to the stores.

◼ Expand the advertising to the on-line social media and target a new cus-
tomer base. The retailer could consider making a Trader Joe’s community,
which in turn could enhance the feeling of belonging/loyalty to the com-
pany.

◼ Fearless Flyer is the primary form of advertising and is only printed three
times a year, the retailer could consider going digital and creating an app
version of the flyer.

◼ The neighbourhoods in which Trader Joe’s operates are often perceived to

“belong to a cultured, informed community of shoppers” (The Atlantic
2012). The company could inform the customers of the importance of eat-
ing healthy food and the value that customers get with it as well as unique
flavours they can get from international dishes offered by the retailer.

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◼ Trader Joe’s managed to grow without debt, hence the financial standing
of Trader Joe’s is strong. The company is currently successfully growing
nationally. However international expansion may also be an opportunity
for Trader Joe’s in particular that the company can learn the lessons from
the German retail store- Aldi (owned by the same family).

Threats

◼ Trader Joe’s business tactics can be at odds. On the one hand the retailer
has an image of a quirky neighbourhood shop, with the products from the
local farmers but on the other some of the suppliers are the big and well-
known companies (Kowitt 2010). Hence the retailer should be careful to
keep its image consistent and credible.

◼ The company is challenged with successfully spreading the organisational

culture to the geographically dispersed locations (as mentioned in the
sample answer to question 2).

◼ Trader Joe’s determines new store openings based on the three detrimental
factors: density of population, educational level of the consumer and dis-
tribution efficiencies. Based on the market research studies, the relation-
ship between education and customer choices have been found. Meaning
that there is a positive correlation between the level of education and the
travel the customers have done. Finding suitable locations to rent can be a
challenge in particular if the company wants to find good prices in the are-
as that fit the customer base. However, it is also important to note that as
the organisation grows, it becomes a more powerful negotiator
(Mallinger/Rossy 2007).

◼ Trader Joe’s for a long time did not experience any direct competition.
However, given the successful store format such competition may emerge
(Mallinger/Rossy 2007), for example the new 365 store chain, owned by
Whole Foods Market, is scheduled to open in 2016. The chain aims to have
more accessible prices for the private label brand and aim to target the
more price-sensitive customers (Kowitt 2015). The products on offer are al-
so healthy and organic ones.

◼ Trader Joe’s does not sell their products on the website. However, websites
carrying Trader Joe’s brand can be found, e.g. PayDragon.com, which also
offers products from Whole Foods or Target (competing retailers). Pay-
Dragon offers free delivery for purchases over $20, however comparing the
prices of, e.g. Trader Joe’s Almonds – Trader Joe’s advertises that in store it
costs about $5.99, whereas PayDragon.com offers the products for $14.97.
Trader Joe’s must ensure that the low price image of the company is not
deteriorated.

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◼ Trader Joe’s has mostly consumers who are loyal to the brand and not to
the particular products, hence if the company does not get the balance
right between keeping the customers happy and growth the loyal custom-
ers may turn to the competition for similar own label products.