Food inflation has been a growing concern for grocery shoppers and the industry as a whole is feeling the pinch. Yet in the midst of these challenges, Trader Joe's has managed to stand out from the competition. We dove into the location intelligence metrics for the chain to take a closer look at how consumer behavior is changing and how Trader Joe’s is driving visits in a dynamic economic landscape.
Trader Joe’s Grows
Food inflation has been weighing on consumers for quite some time, with the most recent wave of price increases beginning in 2022 – but Trader Joe’s has managed to thrive despite the wider macroeconomic challenges. Comparing visits to Trader Joe’s and to the wider grocery category to a January 2022 baseline highlights the company’s strength: Between January and July 2022, Trader Joe’s foot traffic trends mostly mirrored those of the wider food industry. But since August 2022, the baseline change in visits to Trader Joe’s has remained mostly positive, while traffic to the overall grocery category slumped. By May 2023, visits to Trader Joe’s were 6.3% higher than in January 2022, while visits to the grocery category as a whole declined by 5.0% during the same period.
Trader Joe’s continued success may be due to the company’s reputation as a budget-friendly grocery option. The California-based grocer’s many private-label products help keep prices relatively low, and this value perception could be driving a consumer trade-down to Trader Joe’s – a common pattern boosting traffic to many value-grocery in recent months. Still, Trader Joe’s maintains its position as a specialty grocer that affords price-sensitive consumers a premium grocery experience when luxuries are few and far between.
The City of Angels: Something Special
Trader Joe’s position as a specialty grocery store – with a relatively small selection and a focus on private-label as well as limited-availability products – is likely contributing to its recent success. Zooming in on the Los Angeles market – a region where Trader Joe’s commands a high store count – reveals how the chain differentiates itself from other grocery alternatives by emphasizing its specialty nature.
Most Trader Joe's locations are significantly smaller than conventional grocery stores, but the company makes the most of its compact footprint. Analysis of a Los Angeles Trader Joe’s location and a nearby Ralphs – a conventional grocer of the Kroger Co. – revealed that during Q1 2023, visits per sq. ft. for the Trader Joe's were more than three times higher than visits per sq. ft. for the Ralphs store. The Trader Joe’s location’s trade area was also larger than that of the Ralphs location and had less overlap, which means that more shoppers from Ralph’s trade area were visiting Trader Joe’s than vice versa. In addition, the two stores had identical median dwell times despite their size difference. So not only are Trader Joe’s stores smaller and therefore incur lower fixed costs – they also certainly get bang for their buck.
However, during Q1 2023 the Ralphs location had a higher percentage of repeat visitors who visited at least three times (32.4%) than did the Trader Joe’s location (24.9%). The LA Ralphs store’s visitors also engaged in less cross-shopping with Trader Joe’s than vice versa. 49.5% of the Ralphs location’s visitors visited a Trader Joe’s at least once during the quarter while 59.6% of visitors to the Trader Joe’s store visited a Ralphs at least once.
So despite the Trader Joe’s location’s higher visits per sq. ft. and larger trade area, a higher percentage of visitors visited Ralphs repeatedly – a conventional grocery store – during the analyzed period. This suggests that while Trader Joe’s specialty nature is an attractive proposition, demand for conventional grocers remains strong.
Not Your Average Joe’s
Consumers have been increasingly worried about the impact of food inflation. However, amidst these concerns, Trader Joe's has successfully distinguished itself in the competitive market. Despite a decline in visits to the overall grocery category, Trader Joe's has shown impressive growth by leveraging its reputation as a unique and affordable specialty grocer.
For updates and more data-driven foot traffic insights, visit Placer.ai.