That’s an interesting idea Manju. I’m don’t know the details of the supplier relationship, but my hypothesis is that Trader Joe’s might not have the scale to capture efficiencies of large quantities. These manufacturers supply large grocery chains as well, which justify the capital investment for processing equipment. Additionally, Trader Joe’s tends to be more fluid in its product offerings to adapt to customer preferences, which may challenge ownership of fixed manufacturing equipment.
The low number of SKUs is a result of having few brands of a particular item. Trader Joe’s often only carries private label products for a given type of merchandise, such as yogurt or potato chips, while conventional grocers carry many brands of those items. Additionally, Trader Joe’s doesn’t typically have the same level of variety as a normal grocery store, further reducing SKUs.
I’m glad you also love the mango mochi ice cream. That’s my favorite item in the store!
Great observation Julia. I agree that lines are often crazy at Trader Joe’s, and that could be the next point of innovation to improve the customer experience.
Here are some anecdotal experiences that have helped me justify the wait:
1. The lines move quickly, despite the length. I think this fits in with their labor strategy of hiring and retaining efficient workers through higher wages.
2. Most people buy a lot when visiting Trader Joe’s, rather than just an item or two. In my mind, if I’m buying enough to stock my pantry, then I know I’d be waiting for a while at any grocery store I visited.
Wow, this is a really cool company. I think they are adding great value that is unique to this industry, and the operating model works well for skirting legal issues that took down Cleanflicks a decade ago.
For this model to work effectively, users need to be engaged, as we learned from the Threadless case. If the target market is parents with young children, they likely don’t have much free time and may not be willing to buy the movie, clean out the dirty parts, and then watch the sanitized version again. The alternative would be a different activity, or simply fast forwarding/closing kids’ eyes during parts they would rather skip. I wonder if some sort of incentive system needs to be in place to motivate viewers to invest their time in VidAngel, similar to the function of the prize money in Threadless.
I think you bring up some interesting points. I think your comparison between Tesla and Apple makes sense. Many new competitors flooded the smartphone market, and while Apple no longer enjoys near-monopoly status, they are still able to charge a premium. I think the reason for that is Apple’s innovative capabilities, and given Tesla’s big leap in the automotive industry, I think there is significant bench strength in that area.
Your first point about network effects in smartphones is valid, as they limit new entrants in consumer electronics, but to your second point, the capital intensity of automobiles also limits new entrants into automobiles. As long as Tesla can distinguish itself from competitors, presumably through innovation, I think they can maintain premium pricing.
I think your second point is quite salient. If the Model S is priced below variable cost, that’s a huge problem, especially if Tesla has a weak cash position. That doesn’t seem consistent with the pyramid diagram of using Model S revenues to fund Model 3 development.
I think Sweetgreen does a great job of managing the balance between healthy, inexpensive, and tasty in food. I could see this success leading to long lines as a customer pain point. The app is definitely a step in the right direction, but I wonder how many customer still view a long line as a deterrent.
Additionally, while they seem to be executing well, the business seems to have few competitive barriers. Could other similar firms also easily compete in this space and winnow away profits?
Glad you like Trader Joe’s too!
Interestingly, Trader Joe’s doesn’t have much of a backroom and just tends to be very adept at ordering the right quantity. Working directly with manufacturers without the distributor in the middle helps a lot. This practice minimizes the bullwhip effect and allows Trader Joe’s to adapt responsively with customer demand, should a major change arise.
The product is probably the biggest point of differentiation for me too. Trader Joe’s has a team of product developers who travel the world to find inspiration for new items in the store. In fact, their travel and lodging make up the lion’s share of Trader Joe’s’ R&D expenses. Once a product is developed, it’s typically introduce it in a few stores. If it meets sales targets, then it’s fully rolled-out.
Glad you enjoyed it. Try the mango mochi ice cream. That one is delicious and might change your mind 😉
Trader Joe’s tends to open multiple stores in a single location, rather than opening few stores in multiple locations. They aim for places where their target market frequents. These boundaries ensure that they can have the scale to be relevant to manufacturers and command a discounted price. If there are locations like this in the MidWest, then there’s hope for our friends there!
I think the labor strategy helps them overall, similar to Mod Pizza’s philosophy on elevating service to a noble profession. By paying their employees well, they stay longer and can be cross-trained and more efficient, which balances the higher wages. Also, by making Trader Joe’s a fun place to work, its employees are engaged and contribute to making the shopping experience an enjoyable one.