Seth Godin writes:
I was talking with a colleague today about the magic of Traders. Heres how they make billions:
1. they target a consumer that cares a great deal about what they buy at the supermarket. As a result, their customers are more loyal, and more important, are willing to drive farther to get there. This means they can have smaller, lower-rent locations (and fewer of them) which drives up sales per square foot and profits.
2. These customers are big mouths. They sneeze. When they serve something from Traders they brag about, they tell the story of the store. This drives down advertising costs.
3. Most of what they sell is private label. Now that they have scale, they are able to negotiate great prices from their suppliers, and more important, encourage/force their suppliers to make unique items, or organic foods, or foods of higher quality for the money. All of this is a virtuous cycle. The key mantra is that Traders finds foods for its customers, NOT customers for its foods.