Trader Joe's SWOT Analysis (2024)

Company: Trader Joe’s
Founders: Joe Coulombe
CEO: Dan Bane
Year founded: 1967
Headquarter: Monrovia, California, United States
Number of Employees (2021): 50,000+
Type: Private
Annual Revenue (FY2022): $13.3 billion

Did you know? The company is named after a Stanford Business School graduate (Joe Coulombe) who purchased part of the Pronto Markets chain and called it Trader Joe’s.

Table of Contents

Trader Joe’s Strengths

1. Strong distribution network

Trader Joe’s broad distribution network gives it a solid competitive advantage and ensures that the company stays competitive.

Some of the company’s benefits from this centralized distribution network include transparency, lower costs, faster growth, and ease of reaching customers.

The current distribution network that covers 530 stores across 42 states in the United States delivers with speed and ease in addition to reaching products geographically.

2. Long-lasting legacy

Trader Joe’s was founded in 1967 and is one of the United States’ oldest grocery store chains. The fact that it has been around that long attracts dozens of customers.

Its long-standing legacy builds confidence and inspires employees to work harder to take the company’s legacy to the next level.

At the same time, members of society feel a sense of obligation to ensure one of the most beloved grocery stores in America remains in business.

3. Trusted suppliers

Supplier trust is a vital component of any given company. As a private company, Trader Joe’s has managed to create a strong relationship with its suppliers.

Trader Joe’s does not have a factory that makes its products. Instead, the firm relies on third-party manufacturers, such as Snyder’s-Lance, PepsiCo., and Con Agra, to supply the products and labels that it places in its stores.

4. Products variety

When you visit Trader Joe’s retail store, you are confident of getting different types of products, some of which are exclusive to the store.

The company enters into deals with some brands like Pita Chips and Annie’s (Mac and Cheese) to provide them with particular exclusive products.

The company has entered into deals with several manufacturers to be the primary or sole chain to sell their products. As a result, Trader Joe’s carries many unique products in its stores.

5. Competitive products

Trader Joe’s buys products in large quantities directly from suppliers, getting more significant discounts in the process. As a result, the company passes the discounts to customers through low prices.

6. Large employee database

Trader Joe’s maintains one of the most extensive employee databases. The employees undergo training on handling customers and sharing vital insights into the overall customer experience.

The company’s employees are the most valuable assets and receive exceptional vision, dental, and medical plans, competitive salaries, retirement plans, and performance-based job growth. Additionally, the company’s staff gets paid time off and discounts.

7. Brand name

Trader Joe’s has a distinctive brand name that resonates with its target audience. It easily sticks in customers’ minds and creates and maintains trust.

More importantly, this brand name has remained relevant as the company evolves. With such a strong brand name, it is no secret that the company makes such high sales from consistent and loyal customers.

8. Good financial performance

Trader Joe’s annual revenue is about $13.3 billion. It is a considerable advantage that empowers the company to meet its operational costs and still set aside enough funds to expand.

The high revenue of Trader Joe’s is also the key driver to company’s profitability. As it gets more revenue, it also grows its profits by managing its costs to maximize profits.

9. Customer loyalty

The strong brand image that Trader Joe’s has assists it in building customer loyalty. It translates to higher profits because the customers repeatedly buy to generate more revenue.

Loyalty comes about due to various consumer offers given by the company across different product categories.

10. E-commerce platform

Trader Joe’s website is a complete e-commerce platform where customers can shop for everything they want. The user-friendly website is easy to navigate and directs customers where to purchase beverages and food.

Once bought, customers can then have their purchases delivered through a third-party delivery platform.

Trader Joe’s Weaknesses

1. Product recalls

Trader Joe’s has had some product recalls in the past that hurt its brand image. Some of the recent recalls have been on products like Soft-Baked Snickerdoodles, Crispy Noodles, Crunchy Slaw with Chicken, and Chicken & Vegetable Wonton.

These recalls have led to a loss of customer loyalty, introduced legal tussles, and damaged the brand image. Furthermore, they welcome unwanted media attention when high-profile cases are involved.

2. Geographical limitation

Trader Joe’s has heavily invested in the American market and has about 597 stores across U.S. states.

However, the chain still needs to overcome significant geographical limitations compared to the worldwide reach its key competitors have.

3. Lack of deliveries

Although Trader Joe’s allows purchasing products online, the platform still does not provide deliveries, except through third-party platforms such as Instacart, etc.

This turns out to be an absolute weakness in circumstances when all the companies are trying to achieve online dominance.

4. Discouraging customer reviews

In addition to several positive reviews, Trader Joe’s also has numerous negative reviews.

The negative reviews on several products discourage potential customers from buying, making the company lose significant revenue in the process.

Trader Joe’s Opportunities

1. Rising market size

The market size in Trader Joe’s industry has been increasing in the last few years. The global supermarket industry is estimated to be at $3,116.83 billion in 2022, registering a compound annual growth rate of 9.8%.

Trader Joe’s can take advantage of this by increasing its investment to take a sizeable chunk of the industry.

2. Going fully global

Trader Joe’s operates outside the U.S. only in European countries. It means the company still has many other opportunities for growth across the globe by going fully global.

3. Online delivery services

Many companies are thriving by providing only online delivery services. The scope of e-commerce is broad, and Trader Joe’s can take advantage of this by beginning to deliver products to its customers.

The provision of delivery services is also expected to increase sales since customers will be able to order and get products delivered through the same platform.

4. Expand its organic and non-GMO products

There is a rising demand for organic and non-GMO products as the world becomes more conscious of what it consumes.

The growing demand allows Trader Joe’s to invest in organic products that would likely increase the revenue generated.

Trader Joe’s Threats

1. High cost of labor

Trader Joe’s operates in the labor-intensive grocery chain business and spends heavily on personnel expenses.

The company also needs help retaining employees, with only 10% of the employees staying with the company for more than ten years. This forces the company to constantly spend on employee training, thus harming its profit margins.

2. Availability of substitute products

Trader Joe’s mainly sells grocery products, which are easily substitutable in nature. Customers can easily find a replacement and switch to competitors’ products.

3. Stiff competition from other highly-invested firms

Trader Joe’s faces intense competition in the grocery space. According to a report, Trader Joe’s bring in about 10.5% of U.S. adult customers, followed by Whole Foods’ 6.3% and Kroger’s 5.9%.

If the company doesn’t keep investing and making efforts to retain customers, it could lose its market share to competitors.

4. The economic recession that limits debt and credit availability

Recession will have a significant negative impact on the retail industry, as it limits funding availability.

As grocery stores usually require a lot of cash for daily operations, Trader Joe’s could have severe liquidity problems during the economic recession.

References & more information