Why Costco, Trader Joe’s Stop Selling Your Favorites

New York
CNN Business

Chances are, you’ve been there: You go to Trader Joe’s for caramel popcorn, churros, and baked Gorgonzola cookies, or Costco for Kirkland Signature mini peanut butter cups and to-go baked pizza.

But when you get to the store, your favorite snack isn’t on the shelf. And, to your horror, you learn that they won’t be coming back.

They have been discontinued.

This is one of the most disappointing experiences for a grocery shopper. Why a beloved product has disappeared is one of the most common questions customers ask stores. Fans set up social media accounts at Trader Joe’s to track discontinued products, while others blog at Costco about long-lost items.

“We know this can be disappointing — even devastating,” Trader Joe’s said on its “Discontinued Product Feedback” contact page for customers.

There are several reasons why Trader Joe’s, Costco (COST), and other stores have suddenly stopped selling items that customers love.

Sometimes products are seasonal, or manufacturers always plan to produce them for a limited time. Also, for stores like Costco and Trader Joe’s, discontinued items can enhance the treasure hunt-like appeal of those stores.

But more often, other strategies are at work.

One major factor: It’s hard to get shelf space inside Trader Joe’s and Costco and stay there. These companies sell a limited number of items—only the ones that customers demand the most.

This is a completely different strategy from supermarkets and the likes of Walmart (WMT) and Amazon (AMZN), which offer a variety of food products and brands. For example, Costco sells about 4,000 different products at a given time. Traditional supermarkets typically sell 40,000.

Whether the two companies can keep prices below most of their competitors depends on delivering a plethora of best-sellers every minute, every day.

If an item doesn’t sell out fast enough on the shelves at Trader Joe’s or collects dust in Costco’s warehouses, the companies need to turn to items that other customers will snap up.

“The cost of producing and disposing of a slow-selling product doesn’t make business sense if you don’t have high or growing volumes,” Matt Sloan, VP of marketing at Trader Joe’s, said earlier on the company’s podcast this year.

Other times, it’s the product itself: If a supplier raises prices too much or the quality drops, the company pulls it off the shelves.

“Costco would rather not sell something than sell it at too high a price,” said Chuck Howard, assistant professor of marketing at Texas A&M’s Mays School of Business. “For them, selling something that consumers think is too expensive is unbranded. of.”

Costco's shutdown strategy could be frustrating for shoppers.

For example, about five years ago, Costco replaced its $27 10-pound boneless, skinless frozen chicken breast from Perdue with a $21.99 version from Wayne Farms, and Marcus Walker was an assistant buyer for frozen foods at Costco from 2005 to 2020. Say.

Cheaper items from other stores are also easily eliminated.

Costco wants its products to be the lowest-priced option. Walker said it pulled the hot pocket because it couldn’t match the price of Sam’s Club products.

Costco’s team buys and tests a supplier’s product at a competitor’s store to compare its quality to Costco’s product. Walker said that if they found an item tasted better elsewhere, they would ask the supplier to improve it for Costco, and if that didn’t happen, Costco would seek to replace it.

Another issue highlighted by the pandemic is the stability of product supply. If the manufacturer can’t make enough, the company will stop selling it and replace it with something they can keep on the shelf all the time.

In 2020 and 2021, as customers stock up on groceries in high demand during the pandemic, manufacturers have halted production of many secondary products and only produce their most in-demand products. Even as demand eases this year and factories resume operating at more normal capacity, manufacturers are still not producing the wide variety of products they did before the pandemic.

Companies such as Hormel Foods (HRL), maker of Skippy and Spam, and Mondelez (MDLZ), which owns brands like Oreo, recently said they are reducing the number of products they sell to focus on their top-of-the-line product — performance.

Angela Ackerman of the Instagram account @Costcoguide, which has more than 230,000 followers, said Costco fans often ask her why they can’t find Costco’s dry dark chocolate mangoes in particular.

“They fell in love with something and wanted to see it again,” she said.

As Ackerman knows, scarcity can drive sales. When she sees a notification at Costco that precious items are no longer for sale, she buys more items before they sell out. “If I knew it was going to go away, I would hoard it.”

Source link