Tuesday, April 16, 2013

Trader Joe's beards the lion in its den

We note that Trader Joe's, which only recently arrived in the state of Texas, has yet to open it's first Austin store, but has already announced a third Austin location. By my count, the chain will have as many stores in Austin (population <1M) as it has in the Dallas-Fort Worth area (population >6M).

The strong showing in Austin probably reflects TJ's corporate assessment of Austin's lefty-liberal skew. In the rest of Texas, they call it The People's Republic of Austin. But it's also a direct dig at Whole Foods, which is based in Austin.

The two stores are very different, of course. Whole Foods carries far more SKUs, pays vastly more attention to fresh products and national brands, in much larger stores; it's premium priced, too. But, having worked at Trader Joe's, I can tell you that a lot of people come into Trader Joe's stores and load their groceries into reusable bags carrying the Whole Foods logo.

While I'm on the subject of rival grocery chains... There are persistent rumors that Trader Joe's, or Aldi, will acquire Tesco's failed Fresh & Easy chain here in the U.S. That could make sense, I suppose. (After all, I was one of the first people to suggest it.) But a more interesting development would be for Whole Foods to use Fresh & Easy as a platform to fight Trader Joe's on it's own small-store/restricted SKU/own brand territory.

With the backing of Whole Foods, Fresh & Easy could position itself with far stronger organic/sustainable credibility, and encourage Trader Joe's customers to look closer at their favorite stores' environmental credibility.

It deserves its "Whole Paycheck" nickname, but Whole Foods kicks Trader Joe's butt when it comes to produce. The Austin-based chain also maintains far better transparency on environmental issues. That would be a point it could exploit, if it ever really wanted to aggressively go after Trader Joe's erosion of Whole Foods' customer base.

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