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Is Amazon a major threat to Trader Joe’s?
Trader Joe’s and Whole Foods have successfully expanded in lock step over the last few decades, but a new report asserts the arrival of Amazon Prime discounts is helping Whole Foods pull ahead.
The report from Sense360, which tracks data from smartphones, analyzed the impact of Prime discounts at Whole Foods. The study aggregated GPS location data from nearly 100 apps and millions of users, tracking trips to Whole Foods locations and competing stores within a one-mile radius.
The report shows that Whole Foods’ and Trader Joe’s market share were almost on par in 2017, with 51 percent of shoppers choosing Whole Foods and 49 percent, Trader Joe’s. But over the last year, Whole Foods has gained two percent in market share over Trader Joe’s.
Sense360 said the gains are beneficial to Amazon because Trader Joe’s and Whole Foods both attract “urban influencers” — highly educated, high income consumers — that will now be drawn into Amazon’s ecosystem.
While lowering prices may be reducing Whole Food’s “Whole Paycheck” image, Sense360 believes Prime discounts have been the game changer. First introduced by Amazon in February, Prime perks at Whole Foods include 10 percent discounts on all products, cash back on Amazon-Visa card purchases and deals on select items.
An accompanying survey found that 33 percent of all consumers plan to shop more at Whole Foods, and 50 percent of Prime members plan to increase their visits. Fifty-six percent of existing Prime members said the Whole Foods program increases the likelihood they will renew their Prime membership.
As noted by Bloomberg, Trader Joe’s competes head-to-head against Whole Foods in many markets, whereas the major food sellers, including Walmart and Kroger, have little overlap with Whole Foods.
But Sense360s found that — although not as much as Trader Joe’s — Whole Foods has increased market share when located in close proximity to almost every national competitor in the grocery sector, as well as drugstores and discount stores.
A survey from consumer products research firm Tabs Analytics likewise shows Whole Foods making strong traffic gains this year.
- The Impact of Amazon Prime on Whole Foods – Sense360
- Sense360 Report: Amazon’s Whole Food Acquisition Already a Winner After Year One – Sense360
- Is Amazon’s Whole Foods starting to steal Trader Joe’s shoppers? – Bloomberg
- Analyst: Prime perk could eventually double customers at Whole Foods – RetailWire
- Whole Foods to become a Prime perk for Amazon’s customers – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Is Amazon building Whole Foods into a significantly larger threat to Trader Joe’s? How should Trader Joe’s respond or differentiate further? Does this conversely mean Amazon’s impact on other grocers will be limited somewhat to those in close proximity to Whole Food’s locations?
Poll
BrainTrust
Paula Rosenblum
Co-founder, RSR Research
Joel Rubinson
President, Rubinson Partners, Inc.
I’m not sure this data shows any threat to Trader Joe’s from Whole Foods. A 2 percent share shift means one week of shopping has shifted — not a lot. It would be a mischaracterization to assume the two chains are providing the same type of products to shoppers — it’s a different type of assortment with a different price scale. Trader Joe’s should do what it does best — curate food that customers want at a great price.
What would be really interesting is to see where the increases lie. While Trader Joe’s does carry produce and some meats that’s not where the brand affinity is. It’s in their private label packaged and frozen foods. Whole Foods is far more about fresh and devotes a great deal of their footprint to their health and beauty sections. So if the market share Whole Foods is getting is coming in these areas, Trader Joe’s is not the target. Plus, with most of the Whole Foods products, even a 10 percent discount is not going to match the pricing at Trader Joe’s.
Since this is not a race for survival between the two competitors, I am not sure it matters. Both companies appear to be healthy. So what if one grows bigger than the other? Does that mean the end of Trader Joe’s?
There is room for both chains to grow, because their location and assortment strategies are quite different from each other. (Whole Foods has bigger stores, broader assortments and more fresh and organic food.) But the tie-in to Amazon Prime will allow Whole Foods to grow faster — whether this comes from Trader Joe’s or conventional grocers as Whole Foods gets more aggressive on pricing. The bigger threat to Trader Joe’s may come from the 365 small-format concept if Amazon decides to push its expansion faster.
There are grocery store loyalties and there are food brand loyalties. And I find that no single store can satisfy all my food loyalties and preferences. Whole Foods is definitely getting a higher share of my wallet based on Prime. But Stop & Shop and Trader Joe’s still have preferred products I will make the effort to go buy. So I’m glad this is not about race to the bottom price competition, but about real product and brand preference. Applause to the brands and products that earn that kind of loyalty.
I guess I don’t quite understand the concern. I don’t see Whole Foods and Trader Joe’s as the same animal. They are as different as Kroger and Aldi. When the study says Whole Foods is gaining foot traffic from Trader Joe’s, Walgreens and Dollar Tree, I must question what they are really measuring.
Just because the geography is similar, doesn’t mean the customer is similar.
My recommendation to Trader Joe’s is, don’t change a thing. You have a special niche — don’t ruin it by trying to become something else.
I don’t think it’s an issue at all. Sure, Prime members have given Whole Foods a try, since they get a bit of a discount. And heaven knows, Amazon got enough free press for its price drops.
Trader Joe’s is sort of a unique beast. Under-stored (in my opinion, but then, I have to put a cooler in the car if I want to drive down to the closest one to North Miami) and just about 100 percent private label, Trader Joe’s still manages to make shopping fun and a bit of a treasure hunt.
I’ve honestly never understood Trader Joe’s store expansion strategy, but they are in a good position at this point. The company is not Whole Foods and doesn’t pretend to be.
I think the company will do just fine.
Whole Foods’ loyal customers are more likely to fit in the “urban influencers” category and with Amazon’s acquisition, the company is slowly and steadily eliminating stigma of its “Whole Paycheck” reputation; and it’s doing so without reducing quality and appeal — although some supplier relationships may be tested.
In effect Amazon is expanding the customer base for Whole Foods and that has to impact other supermarkets that offer more organic and healthy food choices. However, given the size of a Whole Foods and its range of assortment, I view it as less of a threat to Trader Joe’s and more of a threat to more traditional grocers increasing their share of organic and healthy product choices.
Trader Joe’s is extremely efficient in the checkout process — and checkout is a real nuisance at any grocery store. Additionally, their heritage of high-quality and low-priced private label products remains unbeatable. Combined with their small footprint, Trader Joe’s is easy and fun to shop, with consistently low pricing, superb products and a stable work force. They are truly one’s neighborhood grocery store.
Bottom line, Trader Joe’s should continue to do well by excelling at what they’ve done in the past; other grocery chains are the ones that need to pay heed to Whole Foods’ move from Whole Paycheck to right value.
One additional comment: I believe Prime members have a 10 percent discount on yellow tagged and sale item, not on the entire store (at least not yet).
Not everything in this universe is determined by the dollar … for smart marketers it is no longer the “almighty.” We just simply LIKE going to Trader Joe’s. Even as Prime members, not once have we wondered if Whole Foods might save us a dollar here and there. Like many RetailWire colleagues have said, no worries here.
I need more data before I call a winner in this horse race. Since Sense360 only tracks smartphone data we only have a partial picture of the actual competitive performance of the stores and, at any rate, a 2 percent fluctuation isn’t enough to panic about. I also think that while Trader Joe’s and Whole Foods customers are similar, they aren’t identical and the brand value propositions of both retailers are different enough to keep the mix competitive.
What would be interesting to see is a switch in buying patterns among consumers shopping both retailers, since I assume it is likely that they share a fairly high percentage of target customers. So if I were Trader Joe’s I wouldn’t panic quite yet, at least based on this quasi-survey. As to the last question, I don’t really understand it. For some shoppers Whole Foods is a destination and nothing is going to change that. For the balance convenience plays a greater or lesser role in store selection and so it depends who else is located in a Whole Foods’ unit’s trading area. Without specifics, it’s silly to speculate.
Whole Foods has already gained an additional 2 percent market share over Trade Joe’s in the time it’s been under Amazon. As Amazon keeps reminding us, this is just the beginning of their roll out. The numbers could be chalked up to curiosity of typical Trader Joe’s shoppers but with Whole Foods set to increase physical presence as well as make grocery shopping even more convenient online, I’d say Trader Joe’s has huge reason to be concerned.
This is like a stare-down! I have read and agree with the comments posted. But I was taken aback by one sentence in the article: “Fifty-six percent of existing Prime members said the Whole Foods program increases the likelihood they will renew their Prime membership.” Fifty-six percent? That certainly says something about the relationship Whole Foods has in the mind of these customers. Hmmm. Marketers, take interest.
Or Rich, as some others have noted, it may just be a crappy survey.
I find this research confusing and misleading.
First, Whole Foods and Trader Joe’s do not compete head-on. They serve different groups of consumers. Second, the research does not measure market share, it measures footfall or customer share; that’s a very different metric. Third, I see nothing to suggest that Whole Foods gains have come at the expense of Trader Joe’s.
The fact they’ve “expanded lockstep” doesn’t mean much. The expansion of warehouse stores like Costco and Sam’s have also correlated with Amazon’s growth (although their revenues have been larger than Amazon’s). But correlation is in no way causation.
The lockstep growth of these two is accidental — not connected. And I remain skeptical of this research, especially based on analysis of app data which is random in terms of whose phones have the apps and which phones are disabled from sharing that data.
Trader Joe’s is already clearly differentiated with a core shopper who loves their stores — Whole Foods is not going to replace them.
I’m just gonna say it. Just because they have the same market share does not make them competitors. Whole Foods is not the same animal as Trader Joe’s. And that’s my 2 cents.
I don’t think it’s limited to Trader Joe’s. Amazon is a threat to all grocers, and especially to Walmart, who does over 50 percent of its business in grocery. Whole Foods is giving Amazon tremendous insight that will be used later for the “center of the bell curve” grocery buyer, not just Trader Joe’s and Whole Foods, who are a much smaller slice of the market.
When has Amazon gone small on anything? IMO, there is a great grocery war on the horizon, just as there has been for the rest of retail for the past 20 years. Grocers should not be blind-sided the way retailers were; the track record and M.O. is right there in front of you.
Amazon is a major threat for consumer dollars, and trips, for any retailer that sells what they sell. Shoppers have limited time and money. If they select to spend either at Whole Foods or Amazon.com instead of at Trader Joe’s, they are then chipping away at Trader Joe’s business.
One of the best things about Trader Joe’s is the shopping experience. In order to effectively combat Whole Foods, they need to keep their stores exciting and fun — for every shopping trip and every customer.
I don’t see this as a problem for Trader Joe’s or Whole Foods. Neither will have to shut their doors if the other gains a point or two. Both will survive because they both have their loyal customer base. I am an Amazon Prime member yet I can’t tell you with any accuracy the last time I was in a Whole Foods location. Other than both being grocers, I never thought of them as direct competitors.
The research shows just one thing and it really has nothing to do with Trader Joe’s: Whole Foods has increased sales following its acquisition by Amazon.
Amazon is a threat to everybody because they have cracked the code on simplicity in a complex world and then how to leverage to data exhaust. They have behavioral data for targeting that has now made them #3 in ad revenues. They have this amazing cloud business. Amazon is probably the biggest threat to Netflix.
They are most likely to transform a large portion of CPG to IoT ordering. The same people who shop Trader Joe’s are Amazon Prime customers too. Skate to where the puck is going to be.
Are we really talking about the same customer here? I have a group of Millennial family and friends who I rely on as an informal focus group. They are gainfully employed and live well, but I would not label them “high income consumers.” They do, however, have a fierce loyalty to Trader Joe’s, but rarely, if ever, visit Whole Foods despite being active Prime members. To them, Whole Foods exists in another price galaxy.
Our local Trader Joe’s is thriving and enjoys a diverse economic group of customers. There are plenty of grocery stores out there that sell some similar things but aren’t really strong competitors. I think both chains will survive.
Customers go to Trader Joe’s for unique items, a quirky vibe, and speedy checkout. I was in a Trader Joe’s earlier this week and there were loads of people in the store. If I were running Trader Joe’s I wouldn’t be worried about Amazon, at least not now.
The nuanced value propositions of competing grocers means that many families split their overall grocery basket among 3 or more grocery options. There are differences between Trader Joe’s and Whole Foods that are fundamental and therefore I would not overplay survey results to conclude that Whole Foods is winning against Trader Joe’s.
The bigger win for Whole Foods will be when it begins to steal market share from customers who still do most of their shopping at regional favorites, Publix, Harris Teeter, Wegmans, etc. This probably is the higher goal for Amazon via its acquisition of the Whole Foods chain, but it is not happening yet.
In my view, Whole Foods is at risk today by over-promoting the 10 percent discount for Prime members. Though the article states “Prime perks at Whole Foods include 10 percent discounts on all products” my experience is that discounts are offered only on selected and marked products. In a recent visit to test the value of this discount, I found very few items carrying the discount and was disappointed at the difference in the reality of the shopping experience and the hype with which it was promoted.
Amazon is a potential threat to anyone in retail. If anyone is near a Whole Foods, they should get ready to compete with Amazon. That said, there’s room for competition, especially if that competitor is offering a quality product, competitively priced and is easy to do business with. The moment Amazon moved into the grocery industry, the landscape of the grocery business changed. Retailers will adapt. Some will thrive. Some will struggle. Everyone needs to learn, adapt and move fast.
Finally another voice of reason!
We worked with Sense360 on getting this study out and it showcased some pretty impressive numbers. Whole Foods market conversion increased from 4.8 percent of all grocery store visitors to nearly 6 percent when compared with the same period a year earlier (2.2 million visit sample size). Putting numbers like this on the board is a threat to all grocers. You can review the whole study here 🙂
FAKE NEWS. I’m sorry for being cynical, but I don’t consider a news release on “PRNewswire” (by a 4-year old company that I’ve frankly never heard of) to constitute research … at least not without some independent confirmation. And it seems strange that the two retailers add up to precisely 100%. Exactly what “market” were they looking at here? WF no doubt has some impact on TJ — as does every other store that sells food — but I don’t see anything of importance here.
With all the effort Amazon is putting behind Whole Foods, I expected them to have a greater impact on smaller grocers like Sprouts and Trader Joe’s. The study above mentions a lot of future planning rather than actual shopping trips which as we all know shoppers love to fall back into their old ways once the hype is gone.
Trader Joe’s needs to stay focused on who they are and keep building value around their services, and they should be in a good place in the months to come.
I think on the long list of Amazon “target competitors” Trader Joe’s sits pretty far down the line. That being said, of course a Whole Foods with lower prices, growing store count, increased quality private label goods and more integrated into the overall Amazon eco system will have an impact on Trader Joe’s and other grocery chains. What Trader Joe’s needs to do is double down on what makes it different — friendly and helpful people, local spirit, unique quality products, etc.
I think the bigger threat is how integrated Whole Foods products will with delivery services like Prime Now and Instacart compared to a more “traditional” Trader Joe’s. On the same note, pick up in store seems to be a major move for large grocery chains and the likes of Target and Walmart. The threat to Trader Joe’s is losing out on a segment of shoppers who prefer delivery and buy online/pick up in store as opposed of just losing a battle of single digital percentages of “normal” shoppers.
Trader Joe’s is probably not too concerned with Whole Foods, as they are focused on different customer segments. While Whole Foods is trying to appeal to Trader Joe’s customers, it is a tough sell. Trader Joe’s customer base is very loyal and fanatical about the brand. Offering a 10% discount on inflated base prices is not enough to get customers to switch brands.
It is also more than price. Trader Joe’s has cultivated a unique culture with its employees that makes their stores a fun place to shop where you feel your business is appreciated. This is something that isn’t easily replicated.