The real reason why Trader Joe's is so cheap

Customers love Trader Joe's because of its extremely low prices.

At Trader Joe's, ground beef costs $4.99 per pound, compared to Whole Foods' $9.99 per pound of organic beef. A bottle of olive, which costs $6.99 at Trader Joe's, is $9.99 at Whole Foods.

Consumers view Trader Joe's as high quality but inexpensive. How can Trader Joe's afford to keep its prices so low?

The answer: Trader Joe's sells private-label products instead of well-known brands.

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 grocery chain buys goods directly from suppliers, cutting out the middlemen who can drive up costs.

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.

spinach and kale dip trader joe'sFoodbeast

While Whole Foods has private-label products, they tend to be more basic. The company also sells a wider variety of organic and healthy brands. As Walmart and other grocers begin to stock these products, consumers have less of an incentive to go to Whole Foods.

Much like its parent company, Aldi, Trader Joe's also uses a no-frills design.

Aldi uses boxes instead of shelves when possible, according to frugalbites.com. This frees up workers from having to stock shelves constantly. Once a product runs out, the workers simply replace it with a box.

Another way that Trader Joe's cuts costs and passes the savings on to customers is by spending less on marketing, instead depending on word-of-mouth to attract customers.

Stores use natural and energy-efficient lighting to cut down on utility costs.

NOW WATCH: 14 things you didn't know about Whole Foods

See Also:

SEE ALSO: The real reasons Trader Joe's wine is so cheap


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