This article focused on the economics of two organic health foods grocery stores, Trader Joe's and Whole foods. Trader Joe's is a private ownership grocery store while Whole foods is a public ownership grocery store. Trader Joe's keeps their costs low by offering a limited selection of organic options while maintaining their own private label for many of their grocery products. Their stores are small and usually their locations are in strip malls or shopping areas to keep costs low. Whole foods focuses on building large stores, with a large selection of produce, in affluent areas where there is a high demand for organic groceries. In order to expand and to be successful in more urban areas, Whole foods is trying to adopt the business model of Trader Joe's by developing their own brand and store 365. These smaller 365 stores with the private 365 label has the same benefits of Trader Joe's while taking advantage of the already existing infrastructure and and establishments of Whole Foods. The main dilemma for Whole Foods will be to try to separate the image of Whole Foods with 365 to move away from the image of being expensive and "for the wealthy" as many people consider Whole Foods to be out of their budget while still maintaining the reputation of Whole Foods high quality products.
http://www.investopedia.com/articles/markets/021916/economics-trader-joes-and-whole-foods-365-wfm.asp
I have also read this about Trader Joe's business model before. I think it's awesome that Whole Foods is trying to become a more affordable grocery shop, but I think it will be a hard transition because they have such a strong reputation for being expensive, I have even heard people refer to Whole Foods as Whole Paycheck.
ReplyDeleteI like Whole Foods' new concept. Although targeting the upper class consumers can be profitable, it was a smart move on Whole Foods' part to expand into this new urban territory. It was also interesting to note that Whole Foods can still utilize economies of scale within their new 365 brand.
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ReplyDeleteI think that Whole Food's new model will be an interesting development in the organic foods industry and even provide greater competition with Trader Joe's. Since Whole Foods already has a good reputation and a strong customer base, they are already at an advantage as compared to brand new companies that are trying to compete against Trader Joe's. The only problem I see is that there is a chance that the new model and the "365 label" will not differentiate itself enough from the pricey brand name of Whole Foods and then be less successful overall due to a consumer's preconceived notions about the brand.
ReplyDeleteYeah it will be interesting to see what comes of it. If it offers healthy food at a more affordable price, and allows people in a lower socioeconomic status to eat healthier it seems like a positive. But I don't trust Whole Foods' intentions, they have oversold this whole organic concept and its just another way for people to spend a lot of money on groceries that aren't necessarily healthier than other grocery stores sometimes.
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