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USA: Pandemic-induced pressures on the Trader Joe’s model

Updated: Aug 25, 2020

Cult Discount Retail Chain Trader Joe’s (owned by German Aldi Nord) comes with a rabid following, often with fans petitioning to get stores in their neighborhoods, and despite the outcry over certain brands being deemed offensive and COVID-19 challenges, the popular US cult discount retailer can almost come off as invincible.

Business analysis by Bloomberg recently questioned this, saying the retailer is actually facing a turbulent future as shoppers change habits set off by the pandemic.

The unique, very successfull and profitable US discount retail model is noted to stock less than 4,500 products, only about 10% of what’s carried by a Kroger grocery store, and with its claim to be around 85% all private label, the sales per square meter for the store is more than twice the industry average. Realising an estimated annual revenue of US $15.3 BN, with over 500 stores in 42 states and the District of Columbia, and growing.

That sounds all good, but the Bloomberg opinion piece said that the rise in e-commerce grocery shopping, and Trader Joe’s position to not play in that arena, could hurt the company. The article said Trader Joe’s should at least experiment with a service like Instacart as Aldi US and Lidl US are doing.

Additionally, the small footprint of Trader Joe’s stores, a reason for its extremely high profits in normal times, could hurt it going forward due to social distancing requirements. Less shoppers in store hurt a model that relies on a high number of low-value transactions.

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