Whole Foods is launching a cheaper grocery chain to compete with Trader Joe’s.
The popular grocery store sells twice as much per square foot as Whole Foods.
Consumers love Trader Joe’s because it’s cheap.
A bag of quinoa is $US9.99 at Whole Foods, but $US4.99 at Trader Joe’s. Meanwhile, gluten-free cheese pizza is $US7.49 at Whole Foods vs. $US4.99 at Trader Joe’s, according to dcist.com. Consumers view Trader Joe’s as high-quality, but inexpensive.
Meanwhile, Whole Foods is seen as being too expensive. The grocer even earned the nickname “whole paycheck.”
Whole Foods responded by lowering some prices; however, a recent JPMorgan analyst note says that the company isn’t doing enough to market bargains.
This means that customers likely don’t realise that Whole Foods is getting cheaper.
How can Trader Joe’s afford to be so cheap?
Mostly because it sells private-label products instead of brands.
80% per cent of Trader Joe’s products are in-house, meaning that customers can’t get them anywhere else and the grocer can sell them at lower prices. The creativity of the in-house products is also important.
Some of the most popular products include Chilli-Lime Chicken Burgers, Cookie Butter (a cookie-flavored nut butter), and corn and chilli salsa.
While Whole Foods has private-label products, they tend to veer more toward basic. The company also sells a wider variety of organic and healthy brands. As Wal-Mart and other grocers begin to stock these products, consumers have less of an incentive to go to Whole Foods.
Much like parent company Aldi, Trader Joe’s also uses a no-frills design.
Aldi uses boxes instead of shelves when possible, according to frugalbites.com. This frees up workers from having to stock shelves constantly. Once a product runs out, the workers simply replace it with a box.
Stores utilise natural and energy efficient lighting to cut down on utility costs.
NOW WATCH: How Gristedes Owner John Catsimatidis Got Into The Grocery Business At 19, And Became A Billionaire
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.