How Does Trader Joe’s Keeps Their Prices So Low?

In its recent history, Trader Joe’s has been fairly open about answering customer questions, including if they will ever introduce self-checkout in stores or why they don’t sell products online.

And in this month’s Inside Trader Joe’s podcast episode, hosts Tara Miller and Matt Sloan helped answer another frequently asked question: How does Trader Joe’s set prices on groceries? Why are some TJ prices more budget-friendly than their competitors, and why are others on the more expensive side? Here’s what to know.

First, it’s important to note that grocery stores are experiencing inflation across the country due to various supply chain disruptions, stemming from issues like drought and avian flu. A common pantry staple that has beared the brunt of this is olive oil—and TJ employees explain why.

“Supply has been a bit challenged,” invited guest Chris, a senior category manager at Trader Joe’s explains. “Olives grow in places that have had a little bit less rainfall and a little bit more heat. Spain’s the biggest grower of olives and they’ve had a couple bad harvests in a row.”

Spain supplies over half of the world’s olive oil, so it’s no wonder that olive oil prices have skyrocketed—even at Trader Joe’s. And Chris claims that the grocery chain doesn’t change their retail prices unless necessary, like when the cost of supply changes.

“When we’re lowering prices, we are all a lot happier than when we’re raising prices,” he explains. “We are very, very reluctant to raise our retails. That’s like the decision of last resort. When costs are going down, we don’t wait. We lower the retails the second we find out the cost is going down. We’re gonna always offer a great value on our olive oil relative to everybody else and the best value we can.”

On that note, there are a few products with notably low price tags at Trader Joe’s. This is because TJ’s does not use a cost-plus-pricing model (a system that promotes automatic markups on price points) and instead claims to keep grocery prices as low as possible. 

For example, a 1-lb. bag of classic, raw almonds at Trader Joe’s retails for $3.99, whereas other store-brand bags are being sold for double or triple that price. This is because Trader Joe’s buys the crop when it’s at its peak directly from Californian suppliers so the grocery store chain can receive a better price. Fun fact: California supplies 80% of the world’s almonds due to its Mediterranean climate, and the state’s supply has been strong for the last few years due to rainfall. And by “strong,” we mean that the state is expected to produce 3 billion pounds of almonds in 2024, which is a 21% increase when compared to last year.

The Bottom Line

Trader Joe’s claims it will only raise its prices if the cost of supply raises, and the company aims to keep prices as low as possible for its customers.

“Sometimes our prices are gonna go up because costs change in the world,” Miller emphasized. “But if our costs go down and they often do, we lower our retail prices for our customers almost immediately. That I think really sets us apart from other folks who sell groceries.”

With grocery stores like TJ’s and Aldi maintaining a price promise, we’re able to shop at our favorite places in a budget-friendly way. For more money-saving grocery tips, take a look at how a dietitian on a budget organizes her grocery list.