Trader Joe’s: A Fresh Take on Inventory Management
By: Bianca Bhardwaj & Jasmin Li
The Ivey Business Review is a student publication conceived, designed and managed by Honours Business Administration students at the Ivey Business School.
Walking into a grocery store was once a routine errand, with a shopping list, cart rolling, and picking up everyday items. In today’s world, where every shelf looks the same, successful grocery stores do more than sell groceries at low prices—they create experiences that keep customers coming back. Trader Joe’s is perhaps one of the most well-known retailers with a ‘cult-like’ following cultivated by offering private-label products at competitive prices. The American grocery store continues to struggle with balancing inventory.
Grocery Industry: How Private Brands Are Spicing Up Profits
It is challenging for any company to achieve long-term growth in the grocery industry due to a low CAGR of 0.9 percent, slim profit margins, and undifferentiated product offerings. To be lucrative, players in the grocery store industry need to carve a differentiated angle in the market, resulting in many grocery retailers going the private label route. Private-label products are sold under a retailer’s brand name but made by a third party, allowing them to vertically integrate and cut out middleman production costs while simplifying the supply chain. In turn, retailers can sell these products at lower price points to consumers or magnify profits while maintaining price levels. In 2024, the private label space grew by 3.9 percent, significantly outpacing the grocery industry average. For example, grocery outlets like Whole Foods and Kroger have built out robust private-label brands that play a key role in boosting their bottom lines. Although they cater to less price-sensitive individuals, the 365 by Whole Foods Market brand shows that consumers can view private-label products as both budget-friendly and premium. This shift in perception can be seen across the private-label industry: over 80 percent of U.S. consumers rate private-label food quality as equal to or better than national brands, and almost 90 percent think these brands offer similar or greater value.
The Missing Ingredient: Trader Joe’s and the Art of (Not) Keeping Stock
Founded in 1967, Trader Joe’s is an American chain of grocery stores committed to providing its customers with outstanding value through its high-quality products, competitive prices, and noteworthy customer service. Trader Joe’s prioritizes creating an experience of discovery for its customers; all Trader Joe’s shelves are stocked with 85 percent private-label products, some of which are available for a limited time. Their private-label packaging is often witty and informative, making even the most basic products feel unique compared to leading brands. Trader Joe’s stores carry approximately 4,000 SKUs each, which is only 8 percent of the average grocery store, which carries 50,000 SKUs by offering a few varieties of each product. Additionally, Trader Joe’s practices a “truck-to-shelf” system, which means that the products on the floor are in stock. While this may seem like a practical system at first glance, Trader Joe’s less popular and overstocked items sit idle on valuable shelf space while customers complain about stockouts of fan favourite items.
Trader Joe’s currently holds 1.6 percent of the US Supermarkets and Grocery Stores in 2023, down 0.3 percent from 2019, which can partially be attributable to poor inventory management. Research shows that, on average, nearly 60 percent of SKU records are inaccurate, leading to overstocks and out-of-stocks globally, costing grocers $1.77 trillion. Additionally, increasing competition in the private-label grocery space has made it difficult for Trader Joe’s to capture and retain its market share. To remain a go-to grocery chain for households around the United States, it must find a way to differentiate its product offering.
A Recipe for Success: Trader Joe’s Meal Kits
Trader Joe’s should introduce in-store meal kits called Joe-to-Go to address its inventory challenges. These kits contain pre-packaged ingredient bundles featuring a combination of popular and underperforming Trader Joe’s products. These in-store meal kits provide customers with unexpected and tried-and-tested products to incorporate into their culinary adventures, furthering Trader Joe’s notion of discovery.
Meal kits are a practical next step for Trader Joe's to explore as the industry continues to experience rapid growth. In 2024, the meal kit industry was valued at an estimated $18.1 billion globally, with a projected CAGR of 12.3 percent from 2025 to 2034. Key industry drivers include changing consumer preferences for food options, with the desire for a balanced and nutritious yet convenient meal plan. Personalization is central to the meal kit industry as consumers value having diverse dietary and portion options based on their needs. Sustainability is also an essential factor in the operations of meal kit companies, with the need to minimize food waste and packaging. Furthermore, meal kits have gone beyond the traditional delivery service route, with many companies looking to establish themselves in retail stores for increased purchasing flexibility. This provides an untapped opportunity for Trader Joe's to diversify its product offering while helping customers discover lesser-known products.
The Joe-to-Go kits would be available for pick-up on shelves in stores, as opposed to traditional meal kits that are delivered, to eliminate additional costs and be a part of customers’ grocery shopping experience. As customers struggle to incorporate unusual foods into recipes, Joe-to-Go kits also provide recipes that combine viral products, nutritious essentials, and hidden gems. These meal kits would simplify grocery shopping for customers trying to quickly escape the trademark chaos of a Trader Joe’s parking lot, allow customers to discover new flavours, and encourage future purchases.
Particularly for the price-conscious and time-sensitive consumer, in-store meal kits ideally balance cost and convenience. By removing the delivery aspect, customers can incorporate meal kits into their weekly shopping routines at a more reasonable price. Moreover, compared to meal kit companies like Hello Fresh, Trader Joe’s benefits from economies of scale as meal kit ingredients are also sold in-store. Beyond the economic benefits, meal kits will help Trader Joe’s sell through niche products quickly, reducing food waste and helping improve sustainable business practices.
Case Study: The Amazon Meal Kit Recipe for Disaster
In 2017, Amazon entered the meal kit market with branded offerings sold online and in select Whole Foods locations. Marketed as a convenient way to prepare “chef-designed” meals in 30 minutes or less, the kits included pre-portioned ingredients and step-by-step instructions. Despite Amazon’s strong logistics network and Whole Foods’ retail footprint, the initiative failed primarily because the kits were priced at a premium and designed for online purchase, relying heavily on at-home delivery or scheduled pickup. On the other hand, Joe-to-Go meal kits will be assembled in-store using Trader Joe’s existing product lines, reducing additional sourcing costs. Trader Joe’s can maintain tighter control over margins and quality by using their in-house ingredients while encouraging the discovery of niche products.
The in-store format of Joe-to-Go also aligns more closely with Trader Joe’s customer behaviour. Unlike Amazon, which attempted to compete in the meal kit delivery space, Trader Joe’s has built a loyal base of shoppers accustomed to the typical in-person shopping experience. Placing meal kits on shelves as part of the typical treasure-hunt shopping journey removes the barrier of advanced planning or scheduling while allowing customers to incorporate kits into their regular shopping trips.
Rolling Out a Fresh Take
In particular, the popularity of novel products in Trader Joe’s on social media can help build interest surrounding the Joe-to-Go kits. Trader Joe’s has a strong track record of products going viral on social media, often resulting in temporary stockouts and long lines, proving social media's power and influence on its sales. Trader Joe's can collaborate with popular food content creators using this trend. Creators will be sent Joe-to-Go kits without completed recipes and encouraged to develop a novel dish to share on social media. As a result, Trader Joe’s can crowdsource recipes that align with culinary trends while generating social media exposure for its new food kits.
The Joe-to-Go meal kits should be piloted in high-traffic locations, with vacant sampling stations repurposed for assembly. These kits will be balanced with popular and niche products to aid customers in discovering new ingredients and boosting inventory turnover. Part of the existing shelf and refrigerator space, allocated to overstocked items, will be used to store the meal kits, eliminating the need for additional storage space. Each kit would contain the necessary ingredients to prepare a simple recipe with optional modifications for varying dietary restrictions. If the pilot program is successful, Trader Joe’s should incorporate customer feedback to iterate on the initiative and expand it to stores nationwide.
To further enhance customer engagement, Joe-to-Go meal kits can include a QR code connected to Trader Joe’s blog, podcast, or social media platforms. This gives customers access to recipe variations, cooking tips, and a platform to submit their creations. Furthermore, Trader Joe’s can also benefit from its typical practice of constantly changing its products by creating meal kits aligned with seasonality or trends, such as a “Fourth of July Barbecue” or a “Thanksgiving Feast” kit.
A Taste of Tomorrow: Joe-to-Go’s Winning Recipe
Trader Joe’s has long been praised for its treasure hunt-like shopping experience and quirky product offerings. However, it is clear that their inventory issues have caused customer frustration. Joe-to-Go provides the ideal opportunity to turn over inventory and stabilize demand for unpopular items. Moreover, as the meal kit industry expands, Trader Joe’s will undoubtedly benefit from being a pioneer in offering in-store meal kits. For consumers, this cheaper yet equally convenient option is a no-brainer.
