Trader Joes: Lesson in Value Proposition

One topic I talk about often in business presentations is value proposition.  It’s a simple concept that few people seem to grasp, even though we each deal with it many times a day.

Value proposition is simply why you bought the product you bought.  But, answer to that isn’t always as simple as you think it is or very clear.  There can be many factors.  Some you may be aware of and some you may not be.  Sometimes we think we understand the value proposition, but it often turns out to be something else.

Trader Joes offers an excellent illustration of value proposition.  It has a successful value proposition as evidenced by  its success.  People want what Trader Joe’s sells.

When I first walked into a Trader Joes, I commented to my wife “this seems to be like an Aldi for organic.”  I then read this article about Trader Joe’s a few days ago.  It turns out there’s some truth to my observation.  An excerpt from the article:

Few customers realize the chain is owned by Germany’s ultra-private Albrecht family, the people behind the Aldi Nord supermarket empire. (A different branch of the family controls Aldi Süd, parent of the U.S. Aldi grocery chain.)

Aldi and Trader Joe’s are both low-priced grocery stores that carry fewer off-brand items in smaller footprints than other grocery stores. On those factors they are very similar.

But, after researching the history of both chains on wikipedia, it occurred to me that the ownership mattered little to producing these similarities as both chains resulted from successful, independent black swans (experiments that worked).

And, while they are similar on some basic descriptors, they serve consumers who want very different things.  Aldi serves cash constrained, practical, bargain shoppers, while Trader Joe’s appeals to a different crowd.  As the article put it:

Who’s a fan of Trader Joe’s? Young Hollywood types like Jessica Alba are regularly photographed brandishing Trader Joe’s shopping bags — but Supreme Court Justice Sonia Sotomayor reportedly is a fan too.  Kevin Kelley, whose consulting firm Shook Kelley has researched Trader Joe’s for its competitors, jokes that the typical shopper is the “Volvo-driving professor who could be CEO of a Fortune 100 company if he could get over his capitalist angst.”

Many business managers and owners could benefit from understanding the simple but subtle art of value proposition.

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2 thoughts on “Trader Joes: Lesson in Value Proposition

  1. So what’s the value proposition of Trader Joe’s? As near as I can tell from this article, it’s merely an association with a brand that’s perceived as “hip”.

    PS – I can’t get over it being “Aldi Sud” and “Aldi Nord”. Shouldn’t it be “Aldi West” and “Aldi Ost”, respectively?

    • I’m not sure what the value prop is without spending more time getting to the know the customers. We don’t have any around here. I’ve only been once.

      All I know is that it’s different than Aldi, even though on the surface it would seem to be the same. The mental test to see if the value props are different would be to think about what might happen if they tried to somehow combine the stores. I think the result would be to make the combination less appealing to customers either of the other stores.

      I can guess. It is hip. You get to signal that you buy-in to the organic culture and are socially conscious (they pay their associates well), but you’re are also practical. And, they seem to have good products at good prices, which doesn’t hurt.

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