BusinessWeek has a nice profile of Trader Joe’s, reporting that back in 1967 “Joseph Coulombe owned a small chain of convenience stores in the Los Angeles area that were struggling to compete against a fast-growing newcomer named 7-Eleven. That's when the Stanford University business school grad read a surprising fact—that alcohol consumption rose along with education levels. Coulombe stocked his stores with what he says was the largest assortment of California wines at the time—17 brands. Then he watched them fly off the shelves, as a new demographic now known as yuppies discovered his stores.
“As the 1970s came, Coulombe was among the first to turn Southern California shoppers on to treats such as brie, wild rice, Dijon mustard, and Vermont maple syrup. Coulombe modeled his approach on that of Stew Leonard’s, a Connecticut food merchant famous for carrying a limited assortment of quality products, and to that of Brooks Brothers, which sells only its own label suits. ‘We adopted a policy of not carrying anything we could not be outstanding in, in terms of price,’ Coulombe told BusinessWeek in a telephone interview. ‘It took us about five years because we had to create a whole new chain of logistics. We especially encouraged small businesses as vendors’.”
BusinessWeek notes that in the 41 years since Coulombe made that fateful strategy decision, the company has grown to 280 stores in 23 states, generating roughly $6.5 billion in annual sales; the company’s stores carry about 2,000 items, just a fraction of the number carried by mainstream supermarkets; about 80 percent of Trader Joe’s products are own-label, five times the number carried by most traditional food stores.
And the differentiated strategies continue: “Unlike most supermarkets, for example, Trader Joe's doesn't accept coupons, collect customer shopping info from loyalty cards, or feature weekly sales,” BusinessWeek writes. “Instead it adopts an everyday, low-price strategy. The company does run folksy radio ads in local markets. In a current ad, Trader Joe's Chief Executive Officer Dan Bane pokes fun at other supermarkets that have installed flat-screen TVs for customers to watch at checkout counters. At Trader Joe's, he says, customers can entertain themselves by ‘actually talking’ to employees.”
“As the 1970s came, Coulombe was among the first to turn Southern California shoppers on to treats such as brie, wild rice, Dijon mustard, and Vermont maple syrup. Coulombe modeled his approach on that of Stew Leonard’s, a Connecticut food merchant famous for carrying a limited assortment of quality products, and to that of Brooks Brothers, which sells only its own label suits. ‘We adopted a policy of not carrying anything we could not be outstanding in, in terms of price,’ Coulombe told BusinessWeek in a telephone interview. ‘It took us about five years because we had to create a whole new chain of logistics. We especially encouraged small businesses as vendors’.”
BusinessWeek notes that in the 41 years since Coulombe made that fateful strategy decision, the company has grown to 280 stores in 23 states, generating roughly $6.5 billion in annual sales; the company’s stores carry about 2,000 items, just a fraction of the number carried by mainstream supermarkets; about 80 percent of Trader Joe’s products are own-label, five times the number carried by most traditional food stores.
And the differentiated strategies continue: “Unlike most supermarkets, for example, Trader Joe's doesn't accept coupons, collect customer shopping info from loyalty cards, or feature weekly sales,” BusinessWeek writes. “Instead it adopts an everyday, low-price strategy. The company does run folksy radio ads in local markets. In a current ad, Trader Joe's Chief Executive Officer Dan Bane pokes fun at other supermarkets that have installed flat-screen TVs for customers to watch at checkout counters. At Trader Joe's, he says, customers can entertain themselves by ‘actually talking’ to employees.”
- KC's View:
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Most remarkably, the Trader Joe’s employees talk back.
This is a wonderful story, because the scenario that the company faced 41 years ago isn’t all that different from that being faced by many retailers today – overwhelming competition, and the likelihood that only a strategy that creates a differential advantage can distinguish a company in the minds of shoppers.
Differentiated products. Unique and engaged employees. Sharp prices that particularly stand out because they are on products that can't be found elsewhere.
It doesn’t seem all that complicated, and yet how many retailers actually do it?
