How Much Longer Will Trader Joe’s Last?
That retail apocalypse you keep hearing about? It’s headed for grocery stores next.
So far, the grocery store industry hasn’t been hit too hard by changing consumer shopping habits. As malls and seemingly indestructible big-name retailers close by the thousands, grocery stores keep chugging along, thanks in part to the necessity of eating and a general aversion to purchasing produce online. That’s all about to change.
How much longer will Trader Joe’s survive if it stays the course it’s currently on? Read on to find out.
Trader Joe’s is one of America’s best-loved grocery stores
One marketing poll ranked Trader Joe’s third overall most popular compared to other grocery stores. Fans of the Los Angeles-based chain appreciate the unique spin they put on grocery shopping. The shopping atmosphere is pleasant, the private label merchandise is surprisingly delicious, the organic and natural offerings match market demand, and the prices are overwhelmingly reasonable.
Next: This proves that change is coming.
The price wars are starting in grocery stores
But the threat for grocers isn’t necessarily coming from online shopping. Some grocery stores are starting to feel the pinch as consumers start abandoning traditional stores for discount retailers. Grocery stores are a low-margin business with profits as low as 3% to 5%, meaning every dollar counts.
A 2014 price study revealed that Aldi prices were cheaper than Kroger’s by a whopping 22%. There are several ways they manage to do that — but shoppers care little for the “why.” They just want to save money.
Next: This major acquisition could change everything.
Amazon purchasing Whole Foods could mean big changes
Grocery customers have been slow to adapt to online shopping for their food purchases. While home goods, electronics, and clothing have seen astronomic online shopping growth over the past few years, grocery shopping accounts for less than 1% of online sales total.
However, with Amazon purchasing Whole Foods, a new era of grocery shopping could be on the horizon. Convenience is a huge focus for Amazon to acquire more customers for their new offerings.
Next: This retail giant is more expensive than you think.
Not even Walmart is safe
Walmart may be the undisputed king of retail, but it’s also the nation’s number one most hated supermarket, and it’s not even the cheapest store in town. When Business Insider compared prices between it and Aldi, they found that Walmart was 30% more expensive. That’s why Walmart recently reduced prices on hundreds of products to directly compete with Aldi.
Next: This is one of the most difficult industries to compete in.
Competition for grocery dollars is stiff
The grocery store industry is cutthroat, with every retailer hoping to take home a huge chunk of the $641 billion pie. Dollar Stores have been aggressively vying for more grocery customers, while specialty stores such as Trader Joe’s, Whole Foods, Aldi, and Lidl each try a different approach. But they may all be missing the big picture.
Next: This is what shoppers really want.
Customers are looking for great deals, not more services
One mistake that other traditional grocers keep making? They continue to offer more services such as grocery delivery services, in-store babysitting, and other perks. But despite these efforts, consumers consistently keep choosing low prices over any additional services, which can often cost retailers more than they’re worth.
Convenience is certainly a big draw. But many grocery customers are willing to spend more time to get the best deals.
Next: Here’s how Trader Joe’s can stay in the game.
It will need to reduce operating costs
The best way for grocery stores like Trader Joe’s to survive the impending apocalypse is to cut operating costs as much as possible and pass those savings on to customers. Rather than focusing on expanding offerings or opening more stores, the smartest store owners will instead put their efforts toward lowering prices as much as possible.
Next: The fate of the store isn’t guaranteed.
Trader Joe’s can survive — if it’s careful
Trader Joe’s has a huge following of devoted fans, and one thing it’s known for is low prices and quality offerings. If it continues seeking new ways to keep prices cheap while still providing great customer service, then it will most likely survive the big changes up ahead for the supermarket industry.
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