Strategy: Here's how Trader Joe's keeps its groceries so cheap

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Trader Joe's no-frills store design helps it save money and pass those savings to the shopper.

Trader Joe's products are affordable and high-quality. How are they able to keep prices so low without sacrificing the quality? From private-label products to word-of-mouth marketing, here are some of the reasons that Trader Joe's products are so cheap.

  • Trader Joe's wins over customers with its high-quality and affordable products.
  • Selling products under a private label is one way that Trader Joe's is able to cut costs and pass along savings to the shopper.
  • Here are some other ways that Trader Joe's keeps its prices so low.

Trader Joe's wins over customers with its affordable products.

But despite how relatively low its prices are, the quality is still high.

Part of the reason is that 80% of Trader Joe's products are made for its own private label. That means the grocer is buying goods directly from the supplier, cutting out the middlemen in the supply chain that can drive up costs. Trader Joe's can pass along those savings to the shopper in turn.

Another way Trader Joe's cuts costs and passes the savings on to customers is by depending on word of mouth to spread the word about its products, rather than spending a lot on marketing.

See what else Trader Joe's does to keep its prices low:

Trader Joe's sells private-label products. That means the grocer is buying goods directly from the supplier, cutting out the middlemen in the supply chain that can drive up costs.

Source: Business Insider

About 80% of the products Trader Joe's carries are private label.

Source: Business Insider

Customers can't buy Trader Joe's private-label products anywhere else, but it helps keep costs low.

Source: Business Insider

Trader Joe's doesn't focus on packaging. By spending less time and money worrying about small imperfections in packaging, Trader Joe's is able to cut costs and pass those savings on to the customer.

Source: Business Insider

Like the packaging, the stores are pretty no-frills.

Source: Business Insider

This cuts Trader Joe's costs and allows it to sell its products for less.

Source: Business Insider

Stores also use natural, energy-efficient lighting.

Source: Business Insider

That keeps utility costs low.

Source: Business Insider

Trader Joe's spends less money on marketing its products …

Source: Business Insider

… and depends more on word of mouth to save money.

Source: Business Insider

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