Trader Joe's to create a 'new equilibrium' in grocery scene
With Trader Joe's opening of its much anticipated store in Portland, local food shoppers will now be able to buy Toscano cheese dusted with cinnamon, edamame crackers, Satay peanut sauce and the store's famously cheap wine.
But industry analysts predict the presence of the new store, which opened Oct. 29, will not have a big effect on the local grocery store scene, other than offering a unique shopping experience.
"They're not going to shake up the market too much. They don't impact competition as much as you would think," says David Livingston, a supermarket consultant in Wisconsin. "They're a niche player." The store offers a "treasure hunt," he says, and people come in to track down novelty items more than to do their weekly shopping.
The new Trader Joe's, however, is the Federal Trade Commission's version of competition, or close enough to it. When the FTC made a settlement with Whole Foods over its purchase of the Wild Oats chain in 2007 (the agency had attempted to block the acquisition to avoid a natural-foods monopoly), the commission stipulated that Whole Foods must sell off some of the Wild Oats stores it had closed as a result of the purchase -- including the one on Marginal Way -- preferably to a competitor.
The problem is there aren't many viable competitors to Whole Foods.
"Right now they own a niche by themselves," says food, retail and drug store analyst William Bishop, of Willard Bishop Consulting in Illinois. "They are one of a kind in their niche."
Dan Ducore, who works in the FTC's Bureau of Competition, says Trader Joe's was "better than nothing."
"That was the stark reality," Ducore says, admitting that the FTC does not consider Traders Joe's to be in the same premium natural, organic market as Whole Foods. "It was better for Trader Joe's to operate the store than it to be dark and not operating and not offering any competition at all."
Whole Foods Market declined to comment for this story, and a spokeswoman for Trader Joe's says her company never talks about its business practices.
Bishop says that Trader Joe's is comparable to Whole Foods because it provides an alternative to traditional grocery stores. But he says that Trader Joe's attracts a slightly different shopper than Whole Foods -- the "foodies," he calls them, "the experimental and eclectic."
Mark Leaman, who was shopping at Trader Joe's on a recent evening with his girlfriend, says he won't stop patronizing regular grocery stores. "I'm only going to come here to get the things I can't get anywhere else," he says, like his favorite Marcona almonds.
Nonetheless, because Trader Joe's offers many organic goods, and quite cheaply, Bishop says it's inevitable it will draw some business away. "Trader Joe's will definitely take some business from Whole Foods because anyone who is interested in natural and organic, they can get those products at a lower cost," he says.
He continues, "Most grocery stores are going to lose business but no one will be pinched so badly that they have to react. It'll be a new equilibrium, a new steady state."
A recent trip to Whole Foods on Marginal Way did, however, reveal a towering pyramid of inexpensive wine cases, 12 bottles for $30, in a prominent spot near the cash registers. That comes down to $2.50 per bottle, about the same price as Trader Joe's popular Two-Buck Chuck wine.
Bishop says at some point, he wouldn't be surprised if an East Coast challenger to Whole Foods crops up, or if an already-established business like Hannaford becomes even more competitive. "The vulnerability of Whole Foods is that they are viewed as very expensive, so if somebody can begin to provide that high-touch experience and quality, and the sparkling organic apples, and do it at a more competitive price," they might have a chance, he says.
And though people these days are watching their money, they are willing to spend on the basics, Bishop continues, especially for the things that bring them comfort and enjoyment. "People are cocooning more, and they're more appreciative of food. The demand for high-quality food is increasing," he says.
Most Recent
Most Recent
Comments