The industry-leading sales per square foot is an impressive result. I wonder if Trader Joe’s gains revenue from any slotting fees like mainstream supermarkets. My guess is the total amount of slotting fees is relatively low given that the company focuses on private-label products. Regardless, you’re right in arguing that private-label is one of the key drivers of the company’s success. Because Trader Joe’s does not rely on slotting fees to boost revenues, the company has the freedom to determine which products deserve the consumer’s attention. The shopper benefits from having the best products front and center (rather than just the product most supported by manufacturer’s promotional spending). It also might allow Trader Joe’s to direct customers to higher margin products.
It’s really interesting to see a relatively successful startup willing to change key components of its business and operating models. I wonder if the inspiration for change originated from the entrepreneur or from the board/investors putting pressure on company leadership. The new operating model certainly simplifies pricing and improves matching. Although I’ve never used the service, I would imagine finding it much easier to simply choose a TaskRabbit willing to do the task at a set rate. It reminds me of eBay’s shift from focusing on auctions to fixed-priced listings.
You raise some great questions worthy of additional research!
On the issue of pipeline products, Baxalta has chosen to focus on only three areas enabling it to gain deep expertise in clinical development and regulatory processes. Leading pharmaceutical companies are now seeing the value of investing in a handful of strategic therapeutic areas rather than taking a broader approach searching for any and all blockbusters. Still, other less focused companies have portfolios comprised of generics, medical devices, diagnostics, and animal health products, for example. As for 20 products by 2020, the company has advanced several products to late-stage development with many set to launch each year in various indications and geographies.