Published on: August 23, 2010Fortune
has a long piece about Trader Joe’s, in which it tries to quantify and qualify the things that made the notably secretive retailer so special and successful - especially since there is a gap between some perceptions about the company and actual reality. Some excerpts:
• “Trader Joe's is no ordinary grocery chain. It's an offbeat, fun discovery zone that elevates food shopping from a chore to a cultural experience. It stocks its shelves with a winning combination of low-cost, yuppie-friendly staples (cage-free eggs and organic blue agave sweetener) and exotic, affordable luxuries -- Belgian butter waffle cookies or Thai lime-and-chili cashews -- that you simply can't find anyplace else. Employees dress in goofy trademark Hawaiian shirts, hand stickers out to your squirming kids, and cheerfully refund your money if you're unhappy with a purchase -- no questions asked. At the Chelsea store opening, workers greeted customers with high-fives and free cookies. Try getting that kind of love at the Piggly Wiggly.”
• “Trader Joe's has a deliberately scaled-down strategy: It is opening just five more locations this year. The company selects relatively small stores with a carefully curated selection of items. (Typical grocery stores can carry 50,000 stock-keeping units, or SKUs; Trader Joe's sells about 4,000 SKUs, and about 80% of the stock bears the Trader Joe's brand ... The result: Its stores sell an estimated $1,750 in merchandise per square foot, more than double Whole Foods'. The company has no debt and funds all growth from its own coffers.”
• “Trader Joe's business tactics are often very much at odds with its image as the funky shop around the corner that sources its wares from local farms and food artisans. Sometimes it does, but big, well-known companies also make many of Trader Joe's products. Those Trader Joe's pita chips? Made by Stacy's, a division of PepsiCo's Frito-Lay. On the East Coast much of its yogurt is supplied by Danone's Stonyfield Farm. And finicky foodies probably don't like to think about how Trader Joe's scale enables the chain to sell a pound of organic lemons for $2 ... Take Tasty Bite, which makes much of Trader Joe's Indian food. The Tasty Bite Punjab Eggplant ran $3.39 at a Whole Foods in Manhattan. The seemingly identical Punjab Eggplant that the Stamford, Conn., company makes for Trader Joe's is more than $1 cheaper.”
• “Trader Joe's is a supplier's dream account: It pays on time and doesn't mess with extra charges for advertising, couponing, or slotting fees that traditional supermarkets charge suppliers to get their products onto the shelves ... In exchange, suppliers have to agree to operate under Trader Joe's cloak of secrecy. Fortune
obtained a copy of a standard vendor agreement, which states, ‘Vendor shall not publicize its business relationship with TJ's in any manner’.”
• Re: Trader Joe’s limited assortment approach...
“Take peanut butter. Trader Joe's sells 10 varieties. That might sound like a lot, but most supermarkets sell about 40 SKUs. For simplicity's sake, say both a typical supermarket and a Trader Joe's sell 40 jars a week. Trader Joe's would sell an average of four of each type, while the supermarket might sell only one. With the greater turnover on a smaller number of items, Trader Joe's can buy large quantities and secure deep discounts. And it makes the whole business -- from stocking shelves to checking out customers -- much simpler. ‘It takes them out of the purchasing process and puts them into a decision-making process,’ explains Stew Leonard Jr., CEO of grocer Stew Leonard's, which also subscribes to the ‘less is more’ mantra.”
One of the story’s themes is the issue of whether Trader Joe’s, in getting so big - 344 stores in 25 states and an estimated $8 billion in sales - is forcing it to become so corporate that it could lose some of its entrepreneurial zeal. There seems to be divided opinion on this, with some folks believing that this has already happened, but others saying that good systems are not necessarily a bad thing, and that the company seems to have managed its growth well to this point.