Trader Joes Channel Research and Recommendations

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Trader Joes Channel Research and Recommendations

• Benchmarque Marketing
• Ky Cao
• Jenny Ly
• Olga Mamontov
• Karishma Mirchandani
• Yohannes Teklegiorigs
• James Varughese

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Agenda

• History, Facts and Current Distribution
• O.Mamontov
• Set and coordinate distribution objectives
• K. Cao
• Distribution tasks need to meet objective
• K. Mirchandani
• Alternative Channel Structures
• J. Varughese
• Relevant Variables
• J. Ly
• Best Marketing Channel and Channel Member
  Selection
  
• Y. Teklegiorigs

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Trader Joes History

• Started by Joe Coulombe in Southern California
• In 1979, he sold his chain to the Germany-based
  Albrecht Family
  

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What is Trader Joes?

• Trader Joes is a unique chain of supermarkets
  that carry discount gourmet foods mainly selling
  private label goods. Trader Joes is famous for
  having high quality products at rock bottom
  prices, good service, and quirky style.

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Trader Joes Facts

• The average store is about the size of a small
  supermarket or one-sixth the size of a regular
  super market
  
• Each store only carries about 2,500 products (the
  typical carrying about 25,000 items)
  
• There are no sales or specials and barely any
  advertisements
  
• Small inventories
• Known for having a very friendly and helpful
  staff, also know for paying higher wages then
  competition
  
• Have a cult following of customers

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Distribution

• Similar to parent company ALDI
• They have a few buyers that are knowledgeable
  about food and wine, and they travel the world
  picking the best products.
  
• Buy directly from manufacturers
• They give the manufacturers their requirements
  how much they are willing to pay and let the
  supplier decide whether to take the offer or not.
  
• Paying them timely and usually in cash
• Offer long term contracts

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Distribution Continued

• Suppliers all deliver in the same their goods in
  identical crates that can directly be put on the
  shelves
  

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Evaluate the Relevant Variables

• Intermediary Variables
• No middlemen reduces costs.
• Works one-on-one with manufacturers.
• Able to negotiate costs.
• Behavioral Variables
• Build long-term relationships with
  manufacturers.
  
• Win-win situation for both Trader Joes and the
  manufacturers.

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Set and Coordinate Distribution

• In order to compete against some of the larger
  stores it is also imperative for Trader Joes to
  make the shopping experience as convenient as
  possible.
• Updated website could also be a cheap source of
  advertising

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Set and Coordinate Distribution

• Trader Joes maintains a differential advantage
  with high quality and low price for their
  products that has the ability to cross into
  different markets for example the
  restaurant/prep food market.
• Also by using their existing contacts and the
  contacts of Aldi they can expand into some of the
  markets that have worked well for Aldi such as
  consumer electronics.

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Distribution Tasks

• Marketing Mix
• Consider Place element as a means of gaining a
  competitive advantage
  
• Trader Joes acts as an intermediary between
  manufacturers and consumers considering their
  customers best interest in terms of product
  quality and selection

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Distribution Tasks

• Trader Joes
• Importance of keeping distribution costs down in
  order to provide the low cost quality items
  consumers expect from Trader Joes product line.
  
• The price difference between conventional foods
  and their organic counterparts is often a matter
  of distribution
  
• Katherine DiMatteo (Executive Director Organic
  Trade Association)

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Distribution Tasks

• Means of Extending capabilities
• Expand emphasis on community service
• Trader Joes has been involved in various humane
  issues such as donating towards the Petaluma
  Kitchen that serves meals to hungry men, women,
  and children

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Distribution Tasks

• Means of Extending Capabilities
• Restructuring Channel Strategies
• Resetting the number and types of intermediaries
  to include more specialized members, Trader Joes
  would be able to offer better quality products
  

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Distribution Tasks

• Trader Joes farm out the advertising of the
  products to the manufacturer's and simply
  displays the items as they are received in
  standard boxes.
• Pre-set means of distribution means more time is
  left for employees to provide exceptional
  customer service
  
• This enhances the consumers experience at Trader
  Joes creating returning satisfied consumers.

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Distribution Tasks

• Expand the brand to a new market
• Offer more convenience to current customers
• Means of Extending capabilities
• Location of stores influences the availability
  of the products and the brand to consumers.
  

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Distribution Tasks

• Means of Extending Capabilities
• Trader Joes defines itself as neighborhood
  grocery stores with foods and beverages from the
  exotic to the basic.
  
• Expanding to include international channel
  members of quality products from other countries

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Alternative Channel Strategy

• Current Model
• Using small manufacturers
• Avoiding large contracts and regulations
• Local brands with low amount of bargaining power
• Offering unique and diverse types of foods and
  goods
  

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Alternative Channel Strategy

• Current Model (cont)
• Using small manufacturers
• Not having slotting fees
• Payment to a retailer by a manufacturer for the
  placement of its goods.
  
• This in turn pushes less cost back on the
  manufacturer

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Alternative Channel Strategy

• Trader Joes uses the same size palates and bulk
  packaging to make manufacturers of their products
  easy to display, stock, and store.
  
• This also makes the manufacturers more liable to
  leaving the decisions of how to market and
  advertise their own products, instead of having
  Trader Joes taking care of it.

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Alternative Channel Strategy

• Trader Joes locations are not in prime real
  estate areas and are much smaller than
  traditional grocers.
  
• Typical supermarkets stock between 25,000 to
  45,000 items. Each Trader Joes carries between
  2,000 to 3,000 items.

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Alternative Channel Strategy

• Proposed Changes
• Open up the amount of manufacturers that they
  currently have.
  
• This would allow greater competition, and bring
  about seasonal items.
  
• For example, a certain brand of hot oatmeal
  cereal can be sold in the colder months, and
  regular cold cereal can be sold by a different
  manufacturer in the warmer months.
• Not only would this diversify the amount of
  products sold at Trader Joes, but it would
  create a better customer loyalty base for those
  customers with demanding tastes, and possibly
  create partnerships between manufacturers.

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Alternative Channel Strategy

• Even smaller stores
• Especially in big cities, Trader Joes can utilize
  Express type stores which arent as big as
  original Trader Joes
  
• ex. Tesco Express in England
• Can be a great way to start Trader Joes in a new
  territory to monitor customer frequency

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Alternative Channel Strategy

• Trader Joes can look in to international
  products as well.
  
• By working with smaller farms and food companies
  that are located around the world and the
  relative ease of getting those products to the
  Trader Joes locations can offer its customers an
  even better assortment of products that would not
  be available to its customers.

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Evaluate the Relevant Variables

• Market variables
• Health conscious, upper-middle class.
• Over 200 stores all over the United States.
• Product variables
• High-quality specialty items.
• Hand-selected and tested by panel.
• Product line is constantly changing.

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Evaluate the Relevant Variables

• Company Variables
• Size small supermarket carries about 2,500
  products.
  
• Financial Capacity pays in cash for all
  products.
  

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Marketing Channel Strategy

• Mimic the same strategies of supermarkets while
  maintaining unique identity
  
• Increase the size and number of locations
• Include additional variety of products

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Channel Members

• Criteria
• Preserve values and uniqueness of company
• Able to meet demands and inventory fluctuations
• Strategies are aligned

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Channel Members

• How to get others involved
• Offer discounts
• Free or cheap advertisements
• Show statistics that prove given number of sales
• Offer unique contracts

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Questions?