WHAT WAS THE COMPLEXITY PROBLEM?
An average grocery chain carries around 50,000 different product variants. Managing this many products drives a high degree of complexity in procurement, warehousing and logistics, as well as in-store management.
Trader Joe’s wanted to offer high-quality products at low prices, but this simply wouldn’t have been feasible with the high cost of complexity from maintaining such a broad product portfolio. At the same time, they wanted to expand the number of stores, but that would only have added to the level of complexity. Trader Joe’s needed to find a way of simplifying the portfolio to reduce their costs, but without compromising on the overall customer proposition.
HOW DID THE POWER OF SIMPLICITY HELP?
Trader Joe’s decided to work with a dramatically simplified product portfolio. Today, they carry only 4,000 product variants – in other words, less than 10% of the number that other players in the grocery industry tend to stock.
To achieve this, they have focused on the core products that appeal to their target consumers. High-quality but unbranded organics give Trader Joe’s customers a cheaper alternative to mainstream brands, while a selection of more unusual specialty items can also be offered at lower prices by focusing on own-brand offerings. And since their target consumers lead busy lifestyles, they actually prefer the convenience and simplicity of having fewer options to choose from.
Procurement, warehousing and logistics are all simpler due to the reduced product range. While traditional grocery retailers tend to stock some low-margin products and even some loss-leaders (products sold at a loss to entice customers into the store), Trader Joe’s has cut all of these from its stores.
Having fewer products means ordering them can be done at higher volumes, so Joe’s can negotiate lower purchasing prices, and there is less wastage due to the high turnover of inventory. And, because they now have fewer suppliers to deal with, they can focus on direct purchasing with the manufacturer, thereby cutting out the distributor in the middle.
WHAT WAS THE IMPACT?
Focusing on simplicity has enabled Trader Joe’s to achieve their objective of offering high-quality products at low prices. As a result, it has grown from a quirky regional chain to a national household name. Its limited product portfolio sends out a clear and focused message about the Trader Joe’s brand – this has in turn strengthened its customer value proposition, and the retailer now has a highly loyal base of dedicated customers.
WHAT WAS THE COMPLEXITY PROBLEM?
An average grocery chain carries around 50,000 different product variants. Managing this many products drives a high degree of complexity in procurement, warehousing and logistics, as well as in-store management.
Trader Joe’s wanted to offer high-quality products at low prices, but this simply wouldn’t have been feasible with the high cost of complexity from maintaining such a broad product portfolio. At the same time, they wanted to expand the number of stores, but that would only have added to the level of complexity. Trader Joe’s needed to find a way of simplifying the portfolio to reduce their costs, but without compromising on the overall customer proposition.
HOW DID THE POWER OF SIMPLICITY HELP?
Trader Joe’s decided to work with a dramatically simplified product portfolio. Today, they carry only 4,000 product variants – in other words, less than 10% of the number that other players in the grocery industry tend to stock.
To achieve this, they have focused on the core products that appeal to their target consumers. High-quality but unbranded organics give Trader Joe’s customers a cheaper alternative to mainstream brands, while a selection of more unusual specialty items can also be offered at lower prices by focusing on own-brand offerings. And since their target consumers lead busy lifestyles, they actually prefer the convenience and simplicity of having fewer options to choose from.
Procurement, warehousing and logistics are all simpler due to the reduced product range. While traditional grocery retailers tend to stock some low-margin products and even some loss-leaders (products sold at a loss to entice customers into the store), Trader Joe’s has cut all of these from its stores.
Having fewer products means ordering them can be done at higher volumes, so Joe’s can negotiate lower purchasing prices, and there is less wastage due to the high turnover of inventory. And, because they now have fewer suppliers to deal with, they can focus on direct purchasing with the manufacturer, thereby cutting out the distributor in the middle.
WHAT WAS THE IMPACT?
Focusing on simplicity has enabled Trader Joe’s to achieve their objective of offering high-quality products at low prices. As a result, it has grown from a quirky regional chain to a national household name. Its limited product portfolio sends out a clear and focused message about the Trader Joe’s brand – this has in turn strengthened its customer value proposition, and the retailer now has a highly loyal base of dedicated customers.
การแปล กรุณารอสักครู่..
