- Small stores which are generally one-sixth of the size of regular supermarket
- In-store layouts that are difficult to navigate
- Insufficient Parking
- Inconvenient Locations
- No National Brands, eliminating the use of manufacturer coupons
- Limited variety of 2000 to 2500 products – 10% of consumers find their typical local supermarket
- No emphasis on sales or promotions
- Emphasis on private labels, which represents 80 to 85% of all items stocked
The above descriptions do not appear to characterize 2.3 Billion Annual revenue chain, Revenue of 12 Million USD per store. However they do. The chain we are taking about is Trader Joe
The first thing that strikes from the above descriptions is the us
e of differentiation as a strategy. Let us look at what has it done right
What has it eliminated ?
- Convenience items like Coke, pepsi, lighters etc
- Formal attire for employees
- 0 marketing budget for ad campaigns , inserts, and direct mailers
What has it reduced ?
- Reduced opex by having smaller stores
- Reduce tech investments so that customers can remain in the store for more time.Auto-Check out counter idea was desisted in almost all the stores
- Not very aggressive in opening stores ( remember Webvan )
What has it created ?
- Unique fun type culture in the store
- Store which is to be fun and informative.
- Making a visit to the store more of an adventure than a mundane activity
- Organic food store
- Buy overstocked items from vendors and sell them at a discount, not sacrificing on the quality of the goods
- 5 to 10 R&D stores where quick experimentation can be done on various products
- Two Buck Chuck wine – brilliant move to democratize the wine usage in USA
- Fearless Flyer to market the store thr word of mouth
- Radio Spots to market the store thr word of mouth
What has it improved ?
- Understanding the customer – Create a need for him — Make him aware that Organic food is good and then pitch the product
- Leverage Parent company’s relationship – Aldi- and at the same time retain its unique way of doing biz
- 25 items introduced every week and it is – survival of the fittest- for the private labels
Overall lesson from the founder Joe coulombe :
" You must observe people like an anthropologist. You must observe their Spending habits, Entertainment habits, Commuting habits, Dating habits, etc. The only way to create a great business is to create a need in such a way that it changes one of their habits..This is a tough task..but if you succeed…nothing like it "
The book gives a non-retail industry person a nice overview of the industry and narrates Trader Joe’s success in that context. To have a look at one of their stores, here are some of the snaps