Executive Times
		2005 Book Reviews
		The Trader Joe’s Adventure by Len Lewis
		Rating: •• (Mildly Recommended)
		Click on title or picture to buy from amazon.com
	Niche As an avid Trader Joe’s shopper, I was looking forward to reading Len Lewis’ book, The Trader Joe’s Adventure. While my experience in the store is consistently positive, I found Lewis’ writing to be repetitive, and often lazy. Despite the writer’s shortcomings, there are lessons to glean from The Trader Joe’s Adventure, especially around sticking to an effective niche, understanding one’s value proposition, the importance of customer interactions, and a consistent competitive approach. Here’s an excerpt, from Chapter 4, “Make It Fun,” pp. 58-67: BE CHOOSY Rather than viewing Trader Joe’s as small and cramped, customers see it as a cozy and easy-to-shop environment. It is a mecca for gourmet bargain hunters, natural and organic food freaks, and anyone looking for an alternative to the white-bread, cookie-cutter, conventional supermarkets that dot the country. This is not to say that creativity doesn’t exist in the industry at large. It’s just that Trader Joe’s takes it to a different level. The company flourishes by entertaining customers, creating a need for its own array of private label items, and making product choices easier. Remember, the company’s strategy calls for offering only one or two choices of each item, so shoppers don’t have many options. This strategy has simplified their shopping experience, which elsewhere has become increasingly complex due to the overwhelming variety of products on the shelves. In some ways, this strategy is similar to Oprah Winfrey’s wildly successful book club. When Winfrey selects a title, people read it whether they’ve heard of the book or not. Likewise, when Trader Joe’s says a product is good, people buy it. The chain, much like the book club, edits people’s lives by boiling selections down to the essentials—or at least what Trader Joe’s considers to be the essentials. This entire customer experience is the result of smart, gutsy buying and good customer research, all of which enable the chain to cater to new cultural and culinary trends much faster than its conventional counterparts. Then again, don’t underestimate Trader Joe’s tongue-in-cheek approach to marketing, merchandising, and advertising. By injecting a sense of humor, fun, and reasonable prices into shopping for complex categories like gourmet and health-oriented products, the company removes the anxiety and intimidation consumers feel when shopping other stores. This also enables Trader Joe’s to build credibility and trust among consumers in diverse markets—people who may still shop Wal-Mart for price but long for the good old days of the neighborhood grocer who offered a little something different. This company clearly focuses on doing the right thing versus just getting things done. IGNITE THE IMAGINATION In this case, the right thing is an environment that fires a customer’s imagination. It opens their eyes to culinary possibilities they might never have considered. You can’t always do that with a standard supermarket formula and plain vanilla looks. Sometimes it means being a bit sloppy and haphazard. This is where the plastic lobsters and fishnets come in handy. But, according to industry sources, the downscale look is really a brilliant disguise for a company that has made a science out of looking unprofessional. This lets Trader Joe’s live securely and profitably in the shadow of far larger chains, which seem to regard the company as merely a gnat on an elephant. Competitors see Trader Joe’s as capturing some sales but not enough to worry about compared to a Wal-Mart supercenter, for instance. As retail industry consultant Kevin Keiley puts it, “They [Trader Joe’s] live very close to the moat and people in the castle don’t worry about them.” That’s a big mistake, especially since this gnat-like competitor is clearly biting into the sales of these stores. For one thing, Trader Joe’s is an adept practitioner of “atmospherics,” a concept that can be traced back to 1974, when environmental psychologists began studying the impact of environmental factors on people—like the color of the paint in prisons and hospitals. In the 1980s, atmospherics became a hot strategic tool for trendy retailers like Victoria’s Secret and Niketown to create new and exciting retail shopping experiences. “There’s an entertainment aspect to retailing. It’s all about appealing to a consumer’s lifestyle,” explains Letty Workman, author, lecturer, and professor of international business at Utah Valley State College. “We have a sporting goods chain here called REI. It’s a big playground where you can try out the hiking boots, rock climbing apparel, and accessories on a climbing wall inside the store before you buy. The employees are very informed about the merchandise and all the activities. It ends up involving the consumers at a much higher level. They have fun and stay longer. And the longer they stay in this environment, the higher the probability of purchase.” REI is a lifestyle store where everything is geared to bring customers back. The environment is an extension of who customers are and offers them a chance to express themselves through their purchasing behavior. Trader Joe’s is a perfect model for atmospherics and seems to use it more strategically than other food retailers, both to differentiate itself in the marketplace and to gain customer loyalty. “I have friends in Park City who drive to California. When they do, shopping at Trader Joe’s is always one of the highlights of their trip,” Workman adds. “Consumers have more options these days. If they don’t enjoy a store, they can go elsewhere, including the Internet. Retailers have to give customers another reason to come to the store and go through the trouble of finding a parking space and shopping. Enhancing the entertainment value is one way to do it. This isn’t about organic bread. It’s about treasure hunting, having fun, and telling people about it.” MAKE IT ADAPTABLE Interestingly, the chain’s entertaining ways had some people thinking that Trader Joe’s wouldn’t be much of a success outside of California. They felt its quirky appearance and products would appeal primarily to ex-hippies and West Coast liberals— the Birkenstock set. The quintessential Trader Joe’s customer, whom we’ll examine more closely in the next chapter, has been described as “an out-of-work college professor with a Volvo—an old one.” Still, the formula has translated well in other states, even though it may never be the supermarket of choice in the vast Midwest heartland, the rural South where Wal-Mart is king, or any area with big families that are only interested in specials on national brands. When Trader Joe’s made its initial leap across the country to Boston, many locals were already familiar with the chain from visits to California. When the company opened in Chicago, lines of eager shoppers appeared at the door. This demonstrated to even the retailer’s harshest skeptics that while Trader Joe’s clearly has some demographic boundaries, it really doesn’t have any geographic ones. The company’s entertaining approach has provided a valuable lesson for executives who are willing to open their minds and think differently about retail strategy. Granted, the concept will not work for everyone. Few, if any, large chains could pull off a concept like Trader Joe’s because of the vast differences in retail estate, distribution, buying, marketing, and merchandising strategies alone. That’s one reason why, with the possible exception of Whole Foods Market, Trader Joe’s has no real chain competition. Larger companies simply can’t replicate the culture, nor do they completely understand how it works. To see this, all you have to do is talk to any retail consultant who takes supermarket clients for regular visits to Trader Joe’s stores. “They still don’t get it,” says one observer shaking his head. “Even after all this time, they see the company as a bunch of left-coast hippies wearing stupid shirts, not as a viable format that shoppers love. Believe me, they’re making a big mistake, but Trader Joe’s loves that attitude.” The problem with traditional supermarket executives is that they are confusing fact with perception, according to Kevin Kelley. “You have to understand that Trader Joe’s is an acquired taste,” he notes. “But once people get into it, they start to see it as a weekly hunting trip to find out what’s new. People go out of their way to find one cracker that only Trader Joe’s sells or to buy their (private label) corn chowder.” While many stores have been remodeled in recent years and upgraded to include such basic amenities as wider aisles, automatic doors, scanners, credit and debit card readers, and slightly more modern graphics, the overall concept has changed very little since the first store opened in Pasadena in 1967. In fact, it would be a huge mistake for the stores to change at all, because change might mean abandoning the very things that made them successful. The stores are a magnet for shoppers who agree that less is more and can’t resist coming in for such impulse items as vegetarian pot stickers, organic dog biscuits, or eco-friendly detergents not available anywhere else. The chain’s entertaining style even extends to in-store sign-age, which is often handwritten in a cheerful and comedic style with brief descriptions for all items, including such cleverly named products as Trader Zen’s Foaming Cleanser and Joe’s Very American Salad. This evokes a feeling that the store is home to the eclectic, not the usual sterile supermarket environment striving for mass-market appeal. Even the packaging for its extensive private label lines has a sense of humor. Mexican items like salsas, chimichangas, and burritos are branded under the Trader José monicker; vitamins and nutritional supplements are packaged under the Trader Darwin label; and Asian and Italian fare come under the Trader Ming and Trader Giotto tags, respectively. BUILD YOUR BRAND WITH A HUMAN TOUCH Keep in mind that this clever style is not just about selling products. By using unique names and its trademark approach, Trader Joe’s is building its brand—striving to be some things to some people. In effect, it is using a retailing rifle shot in place of a scattergun approach. The result is that while people go to conventional supermarkets intent on getting out as soon as possible, a trip to Trader Joe’s is an opportunity to linger in an environment that welcomes browsers. If you buy, so much the better—especially for the company’s prodigiously healthy balance sheet. But the environment, a limited but unusual product line, and customer-friendly staff are all geared to fulfill one question: Are you having fun? The mix of these elements—music, decorations, eccentric labels, clever advertising, samples, cheerful employees, and low prices—makes the difference. It’s also a major reason that trying to copy Trader Joe’s operating style is a failing proposition for would-be competitors. “It’s not about the mechanistic—or the machinery—of Trader Joe’s that makes it so wildly successful,” claims retail consultant Gretchen Gogesch. “It’s because they focus on the human side of the equation.” Large companies, whether they sell groceries or clothing, are really fancified cousins of the industrial age and the thinking that came out of that era. To them, it’s all about quantity and getting enough bodies in the store to take products off the shelves. “But this is just delivering commodities, not engaging customers,” Gogesch points out. “Delivering this proposition takes a special vision. In the mainstream, you don’t find that vision in any industry, and they don’t teach it in business schools. As a culture we measure numbers.” Founder Joe Coulombe focused on what made people passionately happy when they walked into his stores. It’s he who best personified the company’s vision. The products made people happy and lifted them out of their otherwise routine, everyday experiences. Then there’s the matter of trust, something that can only be built by being genuine and coming through with the payoff. Other companies talk a good game about being consumercentric but don’t really deliver on the promise when you go into the store. Years ago, the legendary advertising man David Ogilvy said, “The customer is not stupid. She’s your wife. Look across the kitchen table to get an idea of who you’re serving.” Trader Joe’s pulls it off because they are authentic and instill passion for the consumer in every store. Safeway or other retailers can try to knock the company off, but they can’t. The concept fails if you don’t focus on people. This isn’t about putting something on the retail shelf. It’s about what’s in the human heart. It’s part and parcel of what’s been called the Trader Joe’s culture—something the chain wears on its sleeve like a badge of honor. It’s something very difficult for the average large U.S. organization to replicate. Trader Joe’s is extremely focused on what it is and what it is about. As one industry observer noted, “It’s all about being prepared but relaxed, knowing but never condescending, clever but not trendy. The culture dips into the health food movement; the gourmet food, wine, and booze craze; and the ever-popular discount ideal. But all in moderation.” Bill Bishop, a retail industry consultant, puts it this way: “When was the last time you voluntarily went out to browse in a supermarket? People browse at Trader Joe’s.” Libby Sartaine, former head of human resources for Southwest Airlines and now a vice president of human resources for Yahoo, is a loyal Trader Joe’s customer who exemplifies this trait. “I’ve become a regular [customer] since moving to California. I love them, and I can’t live without them now. They have so many things I didn’t know I needed.” Sartaine admits to being addicted to the store’s frozen tofu bars and buying six or eight boxes at a time. The only negative? “It’s so crowded on weekends that you can’t just stroll through and enjoy it.” Then there’s the story of the woman in Cambridge, Massachusetts, who was among dozens who lined up to get into a new Trader Joe’s as soon as it opened. When the doors were finally unlocked she grabbed a cart and ran up and down the aisles shouting, “Yahoo!” When was the last time you saw a customer at your local grocery store do that? CREATE RAVING FANS On its own somewhat irreverent Web site, the company relishes the idea that some customers call the stores “the home of cheap thrills.” Such a comment is typical of the company’s devotees, who often lobby local politicians as well as Trader Joe’s itself to get a store built in their neighborhood. Part of the attraction is that, like them, the company doesn’t take itself too seriously. How could you, when the store is built around a tropical theme with background music that has been described as a combination of the Beach Boys, Seattle grunge, and National Public Radio?^2This seems to fit in an environment where store employees wear Hawaiian shirts and are referred to as captains, first mates, and crew. One thing you’ll notice is that Trader Joe’s stores look pretty much the same whether you’re in Emeryville, California, or Hicksville, New York. The consistency of store design and limited selection of high-quality organic and gourmet items at discount prices attracts people to Trader Joe’s and keeps them coming back, even if the nearest store is 25 miles away. As noted, the chain doesn’t satisfy everyone’s weekly shopping needs and was never meant to. It does represent a more personal shopping experience for those willing to make an additional trip to their neighborhood supermarket for things like fresh meat, brand-name groceries, and a larger selection of produce. The more intimate environment at Trader Joe’s may be even more popular in years to come, as affluent baby boomers with active lifestyles and a yen for something different abandon or at least cut back on visits to traditional supermarkets. Then there are those shoppers who are simply tired of making the trek up and down the aisles of their local 60,000-square-foot store for the same old stuff. EMPHASIZE WHAT’S NEW If there’s one thing that sets Trader Joe’s apart from the rest of the food retailing field, it’s not having the same old thing. In fact, the reason it appeals so much to shoppers is that emphasis on the new and different. And even with a limited number of products, Trader Joe’s offers shoppers a better selection than mainstream supermarkets. “You’re giving consumers a choice if you just stock one blueberry juice instead of ten varieties of Coca-Cola. Customers go there because they don’t need ten choices of the same old thing,” according to one marketing consultant. Trader Joe’s has joined the ranks of retailers who appeal to the shopper’s need for differentiation. This retail group is pretty small and includes Whole Foods Market and Costco warehouse clubs. In fact, some believe that Costco has a lot in common with Trader Joe’s, even though they are arguably at different ends of the retail spectrum. Both have recognized the true value of private labeling and the need to offer a little surprise every time you turn a corner. As one California shopper noted, “When was the last time you had fun shopping at Safeway?” This mind-set goes back to the days when founder Joe Coulombe cherry-picked discontinued merchandise and overstocks from gourmet food manufacturers and local wine distributors. These ever-changing closeouts were partly responsible for turning the shopping experience at Trader Joe’s into recreation. Of course, any discussion of fun shopping would be incomplete without mentioning Two-Buck Chuck, the line of cheap wine produced under the Charles Shaw label and available exclusively at Trader Joe’s. These “extreme value” wines became the fastest-growing label in history when customers began hauling it out of the stores by the caseload.It became a badge of honor—a little secret shared by loyal Trader Joe’s shoppers— and a conversation piece at every Christmas and New Year’s celebration across the country. We’ll take a look in Chapter 8 at how this wine phenomenon came about. Be sure to sip a Two-Buck Chuck while reading The Trader Joe’s Adventure. Steve Hopkins, October 25, 2005
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