There’s a franchise of a grocery store that is so popular their biggest marketing expense is a sampling station inside the store. This store is Trader Joe’s.
Can you imagine a grocery store today with a website that looks like it was made in the late 1990s? There are no data collections, discounts, screaming in-store LED signs, or even an online shop.
Despite that, people are going bananas and are literally begging to open up a new store in their neighborhood. The parking lots are infamously crowded and whenever they open up a new shop, there’s a high probability of something called “the trader tow line” — the store is so popular that people park just about anywhere to get into it. The waiting lines can wrap around the building and towing trucks are having a field day removing the vehicles off the street because there’s nowhere else to park. It's hard to fathom but the grocery store is adored by customers as well as the staff who say it's the best place to work.
In this strategy study, we explored the distinct elements of the Trader Joe’s brand and what made it successful from the marketing and product standpoint. Every chapter includes a takeaway that you can use and think about how to apply it to your business (if relevant).
“We are not in the retail business — we are in the people’s business”
The story of Trader Joe’s starts even before the year 1968 when it was officially renamed to today’s know Trader Joe’s (TJ). The founder, Stanford-educated Joe Coulombe bought up a couple of convenience stores in Southern California - back then these stores were called Pronto stores and they carried miscellaneous items - chewing gum, pantyhose or ammunition box.
Pronto stores actually didn’t take off as you’d expect to judge by today’s success. Early hires remember dressing up in a gorilla costume and nudging people in through the doors. However, they did have great products and they were stocked by a category of products they are most known today: cheese, wine, and nuts. But none of those products was the inflection point that turned the boat towards the wind. It was one product that everyone loved, and Trader Joe’s had it on stock.
The almighty granola.
But having the initial traction is only one part of the product/market fit. What Trader Joe’s did in the years to come are the proper thought-out sustainable strategies for growth.
Trader Joe’s actually wasn’t the green, friendly store tight from the start. Back in May 1958, when Coulombe opened up a chain of Pronto stores he realized that there is a change happening in America.
In the Entrepreneur interview, he said that in 1932, only 2% of all the people were qualified to go to college, while in 1965 that percentage raised to 60%. This meant the mass market is going to change.
The second element was the cost of travel. In 1970, Boeing 747 went into service and radically decreased the cost of flying. This fact also contributed to the name Trader Joe’s and the maritime look. It would show the customers a sense of adventure at the southern seas.
They made the necessary steps to think ahead. At first, it was all about getting some money in. Since the headquarters were located in California, Joe had a smart start offering alcohol. Because in the state of California they had Fair Trade policy, which meant no one would be able to drop prices of alcohol lower than the ones set by the state regulations. The margins and revenue were therefore guaranteed.
“Trader Joe’s was first a liquor shop, before anything else” — Joe Coulombe
Let’s break every element down and identify the growth factors.
I remember when I first stepped into the Trader Joe’s in Seattle’s University District. I was blown away by how it makes you feel welcome. The staff wore these crazy Hawaiian shirts and were goody and talkative. I’ve always loved this kind of bubbly personality with an informal yet helpful approach.
It all falls into the picture of the original Joe’s — the first CEO who said the people are the brand (more on that on company’s values in Chapter 4).
The store itself has a unique look - it looks like a hipster version of Whole Foods with a focus on creativity, homeless and acceptance. The staff who usually wears Hawaiian shirts or Trader Joe’s hoodies are individuals who are happy to be there.
Similar to the shirts there’s also the bell which adds to a maritime feel. But it’s not there just for show. It’s a secret message — one ring means there’s a crowd at the register and someone should come and help out, two rings means that a customer has an important question while three rings summons the store captain a.k.a store manager.
"Sale" is a four-letter word to us. We have low prices, every day. NO coupons. NO membership cards. NO discounts. NO glitzy promotions or couponing wars at our stores. We offer the best everyday values, every day. — Excerpt from TraderJoe’s website
You won’t find any flat screens or screaming billboards for discounts and special offers. Everything is chilled down to offer customers an amazing shopping experience. In every Trader Joe’s store, you’ll find unique art on the walls which are creations from local artists.
The store isn’t just a copy/paste franchise of one base example model but is unique to the neighborhood they are situated in.
All this combined makes them different from any other store out there. It’s not so much about the product (which are of high quality and amazing value), or accessibility (actually they are notorious about too small parking lots and absence of online store) but about the shopping experience.
When you shop at Trader Joe’s you’re not there to get butter, milk, and few dozens of eggs, but you’re there to relax, chat up with friendly crew members and try something new.
This stark contrast to anything else that’s out there gives them a competitive edge in their niche and shines a bright spotlight on their brand and values. Apart from a printed brochure (which is a story on its own - chapter 5), sporadic email newsletter and tasting station (which is the highest marketing expense) Trader Joe’s doesn’t do much else.
Apart from Instagram and Pinterest, they don’t have active Facebook, Twitter or other social media. They don’t use paid campaigns online or offline and for sure they don’t put much focus on website design which looks like it’s stuck in time.
Trader Joe’s Tasting Station - The Biggest Marketing Expense
Who would have thought a simple daily sampling would be the biggest marketing channel. And that it has its place in the customer “journey”. Since there’s always an influx of new products in the store, the station represents a mini public keynote about the star of the day product.
With their brand, they’ve done what every company wants - create relationships and develop thousands of raving fans who can’t shut up about how amazing there are.
Since the people are the brand, Trader Joe’s doesn’t use online shops or deliver products. In a way, they are intentionally cutting back down and turning down huge amounts of revenue. But in return, they are keeping true to their main mission and values. Every interaction is genuine and is aimed to benefit the customer.
Key takeaway #1 — dare to be different.
Don’t imitate, innovate. Read 1,000 true fans from Kevin Kelly. Your job is to create a brand people love and become memorable. Retail is one of the industries where genuine human customer service and knowledge of the product are top-notch.
For a small store that would almost qualify as a boutique (the average size of a Trader Joe's store is around 15,000 sq ft, roughly a third of the size of your typical grocery store). TJ’s had to take a different approach to stocking the interior with products. Rather than cramming as much variety into the small space, they focused on a selection of unique products. They couldn’t compete with large stores that had everything.
The products have to be tasty, nutritious and without GMOs, coloring or preservatives. You also won’t find products with high-fructose corn syrup or MSG. This serves as a guarantee for customers to shop with confidence.
Trader Joe’s products are sourced, tested and checked before they reach the shelves of your neighborhood TJ. As a grocery store, they don’t carry everything — The average grocery store sells around 50,000 items, but Trader Joe's sells around 4,000 items on average. They have to find value somewhere else than sheer volume.
Trader Joe’s has a special position in their job categories that is probably the coolest assignment you could ever have: the product innovation position.
The job of product innovators is to travel the world and find tasty new foods that are a good fit for the next product that is going to be included in the stores. It’s a food treasure hunt that might take you tasting cheese and wine in France, chorizo sausages in Spain or cured meats in a South Korea’s farmers’ market.
Once they find their loot in different sections of the world the product innovators bring the concepts to Trader Joe’s headquarters — either the one in Monrovia, California or Boston, Massachusetts.
The products are prepared and presented in front of the Trader Joe's Food inspection lab. It’s basically a table with crew members who taste different foods and discuss whether this will be included in the stores or not. The tasting happens after lunch, so there are no biased physiological circumstances or biased opinions.
Being at the front is completely different then trailing the trends. But this can only happen if the brand is strong enough.
The innovators bring new ideas from all over the world and sometimes they are even ahead of the curve.
Coconut oil was first introduced at TJ’s way before it has been recognized as a healthy food. The sales records were abysmal. No one bought it.
TJ’s coconut oil before it was cool
But the trend turned and the customers were begging to get it back to the shelves. It has been one of the most popular items ever since.
Once a product is chosen for inclusion in the stores, Trader Joe’s orders it in bulk. This means giant 40 - 50 lbs wheels of cheese at a time. The products are being sent to the TJ kitchen or warehouse where it’s being processed.
Some of the products are going to be cooked or processed before being packaged, while others such as cheese and nuts are being segmented, portioned or cut into smaller sizes. This way Trader Joe’s keeps the costs down and also guarantees fresh and quality ingredients. Naturally, they are subject to all the necessary safety and contamination regulations.
The products are bought directly from manufacturers and growers - there are no middlemen which is another reason why they can keep the costs low.
The tasting is one of the most important aspects of Trader Joe’s. It is happening in all sections of the companies. The product innovation and management decide what gets included in the stores, the crew members and captains of each neighborhood store taste it twice a week to learn about the new product, and lastly, the customer has a chance to try one “dish of the day” in-store or back in their house. They can comment and share their opinion with the customer center via phone or email.
Since Trader Joe’s sells more than 80% of products under private label, they can keep the cost lower while still providing good quality.
Scarcity is an ingenious way to keep customers engaged and keep them coming back. As mentioned in the book Influence: The Psychology of Persuasion (by Robert Cialdini), it’s one of the six principles that “tricks” people into spending more.
TJ might do it to keep the stock fresh, include seasonal products or rotate products that either don’t sell that well so it gives space for newcomers.
But on a bigger level it creates three absolutely genius incentives:
Larger Orders — Customers who find a product they like, are buying them in bulk since they don’t know if it’s going to be discontinued or not. This is also true for the TJ staff as well.
Encouraging the purchase of new products — Every trip to Trader Joe’s is a treat. You already know and expect fundamental elements such as where you’re going to park, what the customer service is going to be, but best of all, you know there’s going to be a couple of new products to try out. Since they passed the taste test, you as a customer can be confident it’s going to be a good or at least interesting meal.
People will talk about it — It generates word-of-mouth and discussion over social media (and over the coffee break in the office). We’ve mentioned that Trader Joe’s doesn’t use social media.
But their fans do!
And there are hundreds of blogger-type websites, Twitter mentions and especially YouTube videos where customers are showing off their TJ hauls, share recipes, or just fanboying/fangirling about how awesome and amazing Trader Joe's is.
TJ is prepared for the holidays by preparing season-specific products. There’s even a rumor that they were the one that started all the pumpkin spice craze for the fall (you’ll find pumpkin spice coffee, pumpkin biscotti, pumpkin spice tea, almond beverage, and pancake waffle mix).
For Christmas, you might find peppermint candy and cute ornaments, for thanksgiving tons of different turkey gravies and sides, and for Halloween ghost-themed snacks.
At one point they might carry 80 season-specific products. This strategy plays into customer curiosity and exploration. During Christmas and Halloween Trader Joe’s is enjoying triple traffic. One thing might be a higher consumption of food in general but there’s also a special selection of sourced products.
“Value is the name of the game of Trader Joe’s product and it doesn’t just mean quality products for a lower price, but every other touchpoint a customer has with it — from entering to the store, talking to the crew members and completing the purchase.”
Whole Foods is trying to encroach on the lower-price, higher quality market with 365-line stores. The story looks similar to Spotify vs Apple music streaming services. Spotify, like TJ's builds the brand as a quirky and unique newcomer with a focus on customer service on one side, and on the other, there are super-rich giants like Apple and Whole Foods (which is under Amazon now) with supreme partnerships and undisputed distribution advantages.
Key takeaway #2 — build an experience.
Products only tell part of the story. Build an entire shopping experience around it and create a memorable service to turn clients into fans.
“Every feedback given is like a gift” — TJ's Customer Support
By now it’s glaringly obvious everything is focused on customer satisfaction. This has turned into an amazing main metric for software companies as well. Team communication software company Slack, which is the fastest growing business app, used customer satisfaction scores (and NPS) as a sole focus of their business.
How much money you bring in is important (but it’s not #1), knowing your audience in TJ is not. They don’t keep any data about you. US chain Target (and probably many other) has been known to gather tons of customer data that is able to predict when you or your significant other is going to get pregnant. Based on that knowledge they ramp up their paid marketing and retargeting channels to lure you into their stores.
It’s statistically proven, couples will spend a lot more money while pregnant and after birth than normal.
Target’s Predictable Big Data Computer Model
Target created a computer model that was able to figure out which shoppers were pregnant just by studying their shopping habits. Identifying pregnant women is the holy grail of retail. People with new babies are so tired that if you can get them inside your doors to buy bottles and formula they’ll end up buying everything else they need as well. If the new parents start shopping at Target they will be coming back for years to come.
How did they predict it?
Lots of people buy lotion but Target analyst noticed that women at Target’s baby registry started buying large quantities of lotion in about their second trimester. Someone else noticed that in about their 20th-week pregnant women started loading up with vitamins.
By crawling through the data, Target was able to identify 25 different items that, when analyzed together, allowed them to predict whether someone was pregnant. The program was so accurate that it could assign any Target shopper a pregnancy score. WILD!
After some time shoppers were getting upset by being analyzed and Target got together with their data scientists team. To be fair, it is kind of creepy how retailers and unmentioned social media channels serve you ads and searches about your last night's dreams.
So Target started mixing in ads for bottles and formula with other products that have nothing to do with pregnancy in their catalog. The pattern looked random and it worked.
The example is taken from Charles Duhigg’s amazing book: The Power of Habit
The NY Times suggests that “Target’s gangbusters revenue growth — $44 billion in 2002 to $67 billion in 2010” can be attributed to their better understanding of consumers with predictable Big Data.
If you as a retail company can find a way to become a part of young parents’ grocery habits the LTV (lifetime value) will skyrocket.
They have none of that at Trader Joe’s.
Customer service is another bright point and they take it extremely seriously. Almost every product a customer buys can be returned without a problem and exchanged for cash.
This serves as an encouragement for buyers to buy and experiment with new products.
Even though crew members rotate through positions (TJ stores are purposely overstaffed - chapter 7), all of them are knowledgeable about what is being kept in the store. Category Managers, for such products as spirits, beer, and wine or cheese, get acquainted with the buyers personally and over time connect with them to a level, where they completely trust them with their next purchase.
Key takeaway #3 — customer service.
Treat your customers like they’re the ones that bring money to the company. Because they are! Establish a system where everyone in the organization realizes the importance of stellar service.
The brand and vision would be hard to achieve without underlying company values each employee - from crew member, captain to product innovators and upper management - embodies.
There are 7 of them. One of the employees even created flashcards.
How to get hired as a Trader Joe’s Crew Member - the cheatsheet
There are internal and external experiences. Internal experience represents the way a customer “feels” about the store experience, or how they feel about themselves while shopping in Trader Joe’s stores.
The external experience may come from great signage that passes along the information, a wonderful demo program, engaging interaction with crew members and store features that entertain or inform customers.
Key takeaway #4 — company's personality.
Vision, company statement, and “boring” blubber talk that goes under a company presentation binder isn’t just there to be cute but establishes the personality and direction. It’s the manifesto on which everyone turns to ensure whatever they’re doing is in compliance with the company and organization.
Trader Joe’s isn’t just a different store, with brand and people in it. It’s different with their ways of advertising as well. The marketing department isn’t big. It’s because there isn’t much to do anyway — take care of the packaging, set up tasting stations and send email newsletters and physical brochures of products.
But that’s the trick, whatever is being put out there is unique and their own. Nothing represents them better than The Fearless Flyers - the companies’ physical brochure.
Most of the flyers you’re getting in your mailbox show big colorful pictures of fresh produce, heavily discounted prices and exclusive time-sensitive deals.
TJ’s produce pamphlet is the opposite. It’s almost all text, almost no pictures except unique Victorian images. The most important point is the copy itself.
Trader Joe’s’ copywriters tell the story about the product, where it was sourced, how it tastes like and what are its ingredients. There’s always a funny pun, hidden joke or some other version of wordplay involved.
This produces intrigue, curiosity, and anticipation among their readers in addition to letting them know about new products they have to come in and try.
Instead of selling the product they sell the experience of it. It’s not just the Fearless Flyer but you can notice the copywriting techniques on the products as well.
An average product has a headline and a subtitle.
What’s with the Victorian images?
The Victorian images were used because they were royalty-free stock creatives which looked a bit funny. TJ doesn’t take itself too seriously and they were also saving money. Since customers got used to them they stuck. It all goes great with quirky, funny copywriting.
Key takeaway #5 — differentiation is key.
Include the story into your products and try good old proven copywriting methods to attract people through the store. Is there any other differentiation factor from your competitors? Test it out.
Since 1958, Trader Joe’s had only 3 CEOs in its entire history. The original Joe — Joe Coulombe was a Stanford-educated business who spent 10 years in proper markets before buying up the chain of Pronto stores I’ve mentioned in the intro.
Coulombe led the store organization for the first 30 years and is responsible for introducing private-labeled Trader Joe’s product which shot the brand into the stratosphere (yes, that was the granola everyone loved).
Even to this day, Coulombe claims the most important part of success is the people who represent the brand. Even though the employees of TJ don’t need specific skills they have to respect the company’s values and genuinely be helpful, kind and eager to help.
“We are not a conventional grocery store. We’re closer to the fashion business than the supermarket business.” — Joe Coulombe, founder of Trader Joe’s
In 1989, Trader Joe’s had 27 stores, all located in California. Coulombe passed the leadership to John V. Shields who orchestrated the growth of the stores. In 12 years he expanded the base of 27 stores to 158.
While Coulombe was intuitive, Shields was more systematic. The most important feature he introduced is decentralized decision-making management. Just like Jocko Willink (former Navy Seal commander and currently best-selling author) states in his book, a decentralized command is absolutely necessary for effective work and leadership.
At Trader Joe’s that meant the store managers (captains of the store) are responsible for decisions, management and eventual success of the stores. This makes complete sense since every store has basic fundamentals in values, but is far away from cookie-cutter copy and paste franchises. Trader Joe’s is a neighborhood store with its own neighborhood feel.
The store has its own artists and own people. The relationships between customers and staff get built faster because of the nature of customer service and the frequency of households and denizens leaving nearby. Shop captains have the cultural knowledge and have free hands in organizing bespoke events based on where they live.
Mr. Shields also standardizes the layout of stores and brought in market analysts into the decision-making process.
In 2001, Dan Bane takes over and formulized the strategy that took 150 stores to today’s 474 and it’s growing.
“What’s really great is that it was sort of the right CEO at the right time throughout history. I think that’s really what’s happened.” — Jon Basalone, President Of Stores @ Trader Joe’s
Key takeaway #6 — hire smart.
The secret of great companies is hiring amazing talent and letting them do their job. Trust your managers to run their departments without you micromanaging them and being the bottleneck of success.
The Neighbourhood Shares program is unique to TJ’s. The staff takes blemished and imperfect products and share them with people who just happen to need assistance. Trader Joe’s has donated over $350 million of product and fed over 58 million meals through the program. They eliminate food waste and help the local people in need at the same time.
It’s impossible to have a successful business that relies on human resources and the quality of customer service without satisfied and happy employees. Trader Joe’s “jolly roger crew” are the actual brand.
Unlike working history and GPA, Trader Joe’s is hiring based on personality. If you don’t like people you have nothing to bring to the table.
“Applicants who did not smile in the first 30 seconds were crossed off the list.” John V. Shields about hiring store managers at Trader Joe’s
In the 2002 interview, John Shields famously said to new hires at TJ: ‘Look, at the end of 30 days, if you are not having fun, please quit.’ ”
To keep crew members on their toes and engaged, Trader Joe’s deliberately overstaffs the stores so the crew can rotate positions. That way they are not just filling the shelves or managing the register which could lower their spirits.
Trader Joe’s new hires are paid above retail average and have 24 days off per year which they can spend however they want. This is called Accrued Reserve which is earned by the amount of time a crew member is working.
“For full-time crew (mates, merchants, captains) the benefit is 9.4 percent of your wages in an absence reserve fund you can use for any time off you may need or want to take. After ten years with the company, it goes up to 10.4 percent. Part-time crew members get 3% the first couple of years and then it goes up to 5%.”
The hourly pay is about $15 while the captains can earn six figures annually.
What distinguishes TJ's employees from other retailers is the work environment.
“We wear Hawaiian shirts because we're traders on the culinary seas, searching the world over for cool items to bring home to our customers. And when we return home, we think grocery shopping should be fun, not another chore.” — From TraderJoes.com FAQ
I found a crew member from Twitter to get some first-hand testimonial how is it like working for Trader Joe.
My name is Michael Barfknecht, I work at Trader Joe’s in Temecula, CA.
Why did you decide to start working with TJ?
Michael: First I was interested in working for Trader Joe’s because my cousin works there and she always talked about how great of an environment it was.
What’s the interview process like?
Michael: The interview process is about the same for everyone, you drop off an application and the mates (managers) ask you some questions right on the spot, basically of why here, favorite products, what are your future plans, and so forth...
If you’re lucky enough to get in for an interview, they range from 1 - 3 interviews. We are a very popular place to work at and get applications literally almost every day, not exaggerating.
How do you like working with TJ?
I’ve been with Trader Joe’s for almost 4 years now. I started at age 16, about JR. year of high school. I absolutely LOVE the company. We hire high schoolers, as well as college students and are pretty flexible with schedules as I also played sports in high school. Trader Joe’s taught me and still teaches me, how to be personable, outgoing, kind towards others. The most enjoyable part for me, not to be cliche, but is all aspects. My coworkers are awesome and fun, they are part of the reason I do like coming to work. Also the customers, yes we do have our occasional rude or unhappy customers, but for the most part our customers we have the most fun with and they always leave with a smile on their face even if they came in unhappy. Another part I love is the fast pace, we have to be on our toes helping several customers at once along with filling the shelf.
Do you feel the compensation is sufficient?
Michael: The compensation I feel is very fair for us. We get benefits, we have to have averaged a certain amount of hours and we get medical, dental, and vision at a very reasonable price. Our company helps pay for it to keep a low cost for us.
Also, our pay rate is very good, working in California, I am able to enjoy life comfortably while still paying all my bills.
Do you see yourself working longer with Trader Joe? Why not?
Michael: Trader Joe’s long-term is not a bad gig at all. Getting promoted and going higher into the company, by either becoming a manager or working in the office (food buyer, regional manager) are all great jobs.
For me personally, I am studying to becoming a foreign English teacher. But Trader Joe’s is flexible with my time off and allowing me to peruse this dream of mine. The company has been a great stepping stone and I would recommend the job to anyone and everyone.
What are your biggest takeaways and lessons while working at TJ?
Michael: The biggest lesson and takeaways I will take away is growing so much personally with people. The job teaches you so much about ordering, and shipments, stocking rotating food, but that anyone can learn. We are all about the Customer Experience, each customer should feel welcomed and can ask any question and be helped by a happy ‘ready to go’ crew member. Each crew member works in every part of the store and so we can answer any question.
For me personally, I really love helping people with everything I do, and this job lets me do that. If I was unsure of my dream job, or didn’t know what to pursue in my life then I would work my way up in Trader Joe’s.
Key takeaway #7 — keep your employees happy.
A company with happy employees is a happy company that keeps on giving in the long run. Give your staff free hands to figure out ways to give back to the community and lift the local brand in the neighborhood’s eyes and hearts.
Instead of fast expansion, TJ's takes a similar philosophy as it does with their products — making sure they have all the necessary ingredients first and find a good spot with high appeal rather than speed.
The brand already has enough strength to attract new people through the doors immediately. According to the customer support center, people even beg them to open the store in their areas by writing petitions and applications.
Trader Joe’s picks their location by first looking at the demographics and buying power. Are there enough households in the area with a sufficient population?
Next, they look at the distance from their warehouse centers. If the stores are along the way of the supply routes it makes the decision much easier.
The last one is finding the right people. “The only thing that holds us back is the number of captains and crew members who can run it the right way. We won’t open the new stores if there are not the right Trader Joe’s people.”
They have the playbook, and they have the brand. The only missing piece to find in the "People, Process, Product" (Marcus Lemonis from The Profit anyone?) is the local crew.
Key takeaway #8 — expand at your own pace.
Sometimes hyper-speed growth could be detrimental to a company’s success. A slow, method expansion on pre-vetted areas with the right deployment of trade routes, talent, and infrastructure is a risk-free guarantee.