Question

Trader Joe's company operates in the US supermarket industry. How difficult is it to make money in the supermarket industry? Why? How have its prospects changed in the last 10 years?

Answer 1

For the companies who are operating themselves in the supermarket, it is a very tough task for them to work on a daily basis and the margin they have in there products is between 1-3 percent. as there is a very high competition between different companies selling the same product so they need to keep the price of the product low and if they start charging more for that product then their customers will shift to there competitors' product and you will see the decline in the selling of your product. It is very difficult for the company to make money from the supermarket as they have to keep there margins low but the main focus in the supermarket is on the quantity. They orders the product in bulk and on a daily basis. So their work is to increase the sales of the product not to increase the profit margins. Moreover, there are hundreds of companies selling a similar product and which also confuses the customers and having high competition in the market, companies are getting less money. In the last 10 years, the purchasing of basic necessity products has completely changed. Earlier, people used to buy it from there nearby grocery stores at high prices because the store owner also adds there margin in it which increase the cost of the product. But now because of supermarkets, people are getting the same product at a lower price and that's the reason people prefer supermarkets over the grocery stores.

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