- [Narrator] These 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 cents.
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 manage to keep prices low
while out-competing traditional grocery stores
by selling fewer products?
This is the economics of Trader Joe's.
- Trader Joe's stores are smaller
and they tend to carry fewer items,
and the vast majority of what they sell is private label.
- [Narrator] When the store first opened in 1967,
Trader Joe's founder, Joe Coulombe,
emphasized stocking products that were 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.
- Cacio E Pepe pasta sauce from Trader Joe's.
- It helps with fueling the experience for customers.
People can go and kinda feel
like they're discovering something new.
- [Narrator] 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.
- [Narrator] 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 program, 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.
- [Narrator] Trader Joe's smaller selection
can make the in-store shopping experience more efficient
for customers, according to psychologist
and professor, Barry Schwartz.
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 prices.
- Trader Joe's items tend to be cheaper,
because they buy directly from producers and manufacturers
whenever they can, so this cuts cost
that would typically go to the middleman,
and the company says they are able to pass that
along to shoppers.
- [Narrator] Trader Joe's says it buys in bulk
and often pays for items upfront
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 Trader 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.
- [Narrator] Some grocery stores
charge brands various marketing fees to stock products,
but Trader Joe's says it only makes money
when customers make a purchase.
So according to Trader Joe's,
this incentivizes it to only stock products
that customers like,
from Joe-Joe's Sandwich Cookies to Kung Pao Chicken.
- There isn't really another chain that does what they do.
There are other discounters that sell for cheaper,
but you're not gonna find the innovation
and the fun products there.
The traditional grocery stores have tried to go that route,
but Trader Joe's is Trader Joe's.
(upbeat music)