Trader Joes is
in the broad market of grocery retailers, a market where the top 10
revenue-generating companies accounted for over $360 billion in
sales in 2011. This market is saturated with supermarkets (Publix
and Kroger), large discount retailers (Wal-Mart and Target),
premium retailers (Whole Foods and Fresh Market), warehouse clubs
(Costco and Sams Club), and hard discount retailers (Dollar
General). With this large variation in grocer strategies, the
market is heavily penetrated and competition is fierce.
Supermarkets are continually losing market share in grocery sales
(51 percent in 2011 as opposed to 66 percent in 2001) as players
like Wal-Mart and Costco continue to generate more revenue.
Although the
supermarketshare is decreasing, the overall grocery market is
steadily increasing as the population of the United States
increases. People always need to eat, so there will always be a
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Although there
is not a large amount of new food entering the market, there are
many new brands and creative packaging constantly being introduced
into the grocery market, and food companies are constantly
competing for slots in grocery stores. For these reasons, product
innovation is key to the grocery market. Economies of scale play a
major part in grocery sales. Since many food and beverage items are
commodities, there is a fairly predictable demand for each product,
so companies seek to gain a competitive advantage through economies
of scale. Wal-Mart is the poster child for economies of scale
because they are constantly seeking to lower costs for their supply
chain so they can continue to offer the lowest price among grocery
retailers. Also, since many products are nonperishable items they
can be bought at huge quantities for very low
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