Trader Joe's Gets Candid About Its Pricing Model

Joe Coulombe, founder of Trader Joe’s, once declared, “We violated every received wisdom of retailing except one: We delivered great value, which is where most retailers fail.”

Trader Joe’s still defines itself on value – and continues to try to define it to shoppers. Case in point: The latest episode of the Inside Trader Joe's podcast, in which hosts Tara Miller and Matt Sloan shared what cost, price and value mean to the business and how that translates to the customer experience. Such considerations are especially top of mind in today’s operating environment, as inflation, while easing, remains a hot topic, both in everyday conversations and in business and political discourse.

“At Trader Joe’s, prices are a part of value and what we mean by value is offering outstanding quality at great prices. Price is what you pay, value is what you get for it,” explained Sloan, VP of marketing for the retailer, at the outset. 

The hosts talked with a senior category manager about the retailer’s ability to deliver on both price and value through its store brand assortment and buying practices. “Part of our philosophy is that we're like a buying agent for our customers. We want to get you the best deal. When prices are lower, people tend to buy more stuff,” said marketing director Miller. 

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Using the example of recent shortages in olive oil production, the hosts noted that Trader Joe’s doesn’t change prices unless its own costs change dramatically. “We are very, very reluctant to raise our retails. That's like the decision of last resort,” said the senior category manager. “When costs are going down, we don’t wait. We lower the retails like the second we find out the cost is going down. We're going to always offer a great value on our olive oil relative to everybody else and the best value we can.”

Sloan reiterated the fact that Trader Joe’s doesn’t adhere to a rigid or even standard pricing model. “That's what's known in the industry as a cost plus pricing model, where regardless of the cost and regardless of the competitive landscape, you just add a fixed percentage, and that's how you price it out. Well, for us, that marketplace relativity, the comparison between a Trader Joe's price and a similar product found elsewhere, that's really important to us and we want to make sure that our pricing is compelling,” he pointed out. “We lead with our customers in mind, and at the end of the day, we have to pay our bills and pay our folks working in stores. So we need to make a reasonable, a fair markup that's our profit on it, and that can really vary product by product or even throughout time over the course of the year.”’

In other news, Trader Joe’s opened a new store in San Francisco on May 17. Located at 555 Fulton Street, the latest outpost in the Hayes Valley neighborhood is the seventh Trader Joe’s in the California city and is housed in a space that had long been vacant.  

That’s not all, either: The retailer is hosting a grand opening on May 23 for another new location in Boston, at 500 Boylston Street.

With more than 500 stores in 40-plus states, Trader Joe’s is No. 27 on The PG 100, Progressive Grocer’s 2023 list of the top food and consumables retailers in North America. PG also named the company one of its Retailers of the Century.