In the middle of price hikes, it is logical that we pay close attention to prices when we go shopping at the mall. Trader Joe’s continues to maintain competitive prices, really low if we compare them with much of its competition. But this is no coincidence. It is important to understand that each commercial chain sets its own strategies concerning products and prices.
In this case, the method used by Trader Joe’s is not particularly new. Still, applying it is very effective in maintaining a quality/price ratio that is very attractive to consumers. It is not difficult to understand why this retail chain can apply low prices: more than 80% of the products it sells are in-house, private label, and not name brand. That is the secret, but although this is relatively common, there is more to it.
What is Trader Joe’s strategy for keeping prices low?
Another key factor is that these products, which you will not be able to buy anywhere else, have generally been negotiated directly with the suppliers. It must also be understood that many intermediaries within the commercial chain bring a product to your shopping cart. You are reducing costs by eliminating intermediaries or reducing them as much as possible.
When this cost reduction is applied effectively, final prices become much lower. And this is the foundation on which Trader Joe’s strategy is based. But it is not the only one.
Why do Trader Joe’s private labels do so well?
You might think that low price is the key to the success of this trading firm. And although it is indeed a fundamental factor, other commercial brands also have low prices on their private label products, and they do not sell as much. The answer to this question is very interesting: variety and specialization. We are generally used to relatively basic private-label products with little variety and specialization.
Trader Joe’s breaks this stereotype and offers very creative and attractive products. This way, it does not make the low price incompatible with the variety of offerings. Another important aspect, which reduces costs and results in low prices for the customer, is the use of simple designs. Lowering the cost of the layouts and distribution of the products in the stores reduces the company’s final price. That allows for lower prices.
We also find other cost reduction actions, from investing less money in marketing to implementing energy efficiency measures in their facilities. In short, many steps will complement the main fact of promoting their private brands over the products of well-known brands.