Trader Joe's is on fire.
The company famously sells more than two times per square foot than the average grocery chain.
For years, Whole Foods Market was the dominant name in organic groceries.
But the company has recently faced declining sales as more companies offer organic food.
Consumer perception of Trader Joe's is significantly higher than Whole Foods Market, according to a recent YouGov BrandIndex study.
Here are a few reasons Trader Joe's is thriving, while Whole Foods is struggling.
Trader Joe's is cheap. A bag of quinoa is $9.99 at Whole Foods, but $4.99 at Trader Joe's. Meanwhile, gluten-free cheese pizza is $7.49 at Whole Foods vs. $4.99 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 realize that Whole Foods is getting cheaper.
Private-label products. Eighty percent 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 Chili-Lime Chicken Burgers, Cookie Butter (a cookie-flavored nut butter), and corn and chili 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.
Trader Joe's knows its audience. Trader Joe's is focused on product innovation and selling groceries and wine at a cheap price. Because customers know they can get high-quality stuff at a low price, they pack Trader Joe's stores.
Whole Foods has had a harder time differentiating. The company's response to all the competition isn't encouraging, according to a recent Bloomberg Industries report.
"New initiatives at the retailer, including online ordering and broadening the produce assortment to include more non-organic items, may push Whole Foods from unique to mainstream as it seeks a broader customer base to defend against direct competitors such as Sprouts grocers such as Kroger," according to Bloomberg.
In order to stand out, Whole Foods needs to differentiate its products.
