{"id":112762,"date":"2021-11-26T11:30:00","date_gmt":"2021-11-26T16:30:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/?p=112762"},"modified":"2022-11-21T09:49:37","modified_gmt":"2022-11-21T14:49:37","slug":"how-trader-joes-beat-big-box-supermarkets-while-staying-true-to-its-quirky-roots","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/how-trader-joes-beat-big-box-supermarkets-while-staying-true-to-its-quirky-roots\/","title":{"rendered":"How Trader Joe\u2019s Beat Big Box Supermarkets While Staying True to Its Quirky Roots"},"content":{"rendered":"\n

Unusual foods, a vast selection of cheap wine, and friendly staff in tropical shirts helped the late Joe Coulombe turn Trader Joe\u2019s into America\u2019s most-loved grocery store.<\/strong><\/p>\n\n\n\n

Trader Joe\u2019s doesn\u2019t have loyal customers \u2014 it has a fanbase. People gladly brave notoriously long lines for the check-out counters and plan their weeks around the best shopping times (never go on Monday, we\u2019ve been told).

The chain is so popular that an enterprising Canadian tried to bootleg it. In 2012, Michael Hallatt set up \u201cPirate Joe\u2019s,\u201d which was stocked with products he bought from Trader Joe\u2019s across the border in Washington State. His business was going strong until 2017 when the U.S.-based grocer\u2019s lawyers put a stop to it<\/a>.

As far as business success stories go, Trader Joe\u2019s is certainly unique among grocery retailers, which tend to not generate anything close to its cult-like enthusiasm. The company managed to carve out a niche for itself in the $785.5 billion U.S. market by embracing its quirkiness.<\/p>\n\n\n\n

Trader Joe\u2019s was founded in Pasadena, California in 1967 by San Diego native Joe Coulombe. A recent Stanford graduate, with a bachelor\u2019s degree in economics and an MBA, Coulombe initially took a job at Rexall drug stores where he ran a new concept called Pronto Markets. The concept, designed to compete with then-Southern California convenience upstart 7-Eleven, didn\u2019t work out.

But rather than let Rexall completely shut down the brand, Coulombe brought the Pasadena store from the drug chain and re-launched it. <\/p>\n\n\n\n

All things tiki were popular<\/a> at the time, so he decided to give his new store a tropical, tiki-inspired theme and give it a name similar to the legendary Beverly Hills restaurant Trader Vic\u2019s. And so Trader Joe\u2019s was born.

Although Trader Vic\u2019s was known to be pricey, Coulombe wanted Trader Joe\u2019s to be affordable. At the time, more people were graduating from college, international air travel was booming, and Americans were discovering foods that many ordinary supermarkets didn\u2019t sell. Variety reported<\/a> that Coulombe called Trader Joe\u2019s ideal customer \u201cthe over-educated and the underpaid,\u201d with a sophisticated palate but not necessarily a big bank account.<\/p>\n\n\n\n

In 1972, Coulombe introduced the first Trader Joe\u2019s private label product, granola. It proved to be a hit, and an instant game-changer<\/a> for the company.  The chain began to invest heavily in developing private-label products, which allowed it to keep costs down. Trader Joe\u2019s private label brands Trader Giotto\u2019s, Trader Ming\u2019s, and Pilgrim Joe debuted in 1977.

Coulombe loved wine, and at the same time as he rolled out the private label granola, he began carrying California wines in his stores. In doing so, he helped put California wine on the culinary map.<\/a> In an interview with the New York Times<\/a> in 1987, he said, \u201cI must sample about 4,000 wines a year. Of course, we don\u2019t buy them all.\u201d  Eventually, the retailer launched its \u201ctwo-buck Chuck\u201d and made $1.99 wine a national sensation.

Good, cheap wine wasn\u2019t the only foodie trend Trader Joe\u2019s is credited with starting.  The retailer sold whole bean coffee at a time when the International Delights brand was considered the cr\u00e8me de la cr\u00e8me of coffee and Starbucks was still years away from being a household name. Trader Joe\u2019s was also the U.S.\u2019s biggest importer of brie cheese and dijon mustard in the 1970s and 1980s. In another instance of being ahead of the curve, the chain began selling reusable canvas grocery bags in the 1970s.<\/p>\n\n\n\n

Coulombe sold Trader Joe\u2019s in 1979 to Theo Albrecht\u2019s Aldi Nord, but continued to run the company until 1987. At the time of the sale, there were 19 Trader Joe\u2019s stores in California. John Shields took over as CEO in 1987 and expanded into Arizona in 1993, the Pacific Northwest in 1995, and Boston in 1996. Between 1990 and 2001, Trader Joe\u2019s quintupled the number of stores it had which led to a tenfold increase in profit. In 2008, a report from Bloomberg<\/a> revealed that Trader Joe\u2019s had the highest sales per square foot of any American grocery store.

Here is a map of every Trader Joe\u2019s location in the U.S. currently, based on data gathered by Thinknum.<\/p>\n\n\n\n

\"Trader<\/figure>\n\n\n\n

Under Albrecht\u2019s Aldi Nord, Trader Joe\u2019s retained the vision of Coulombe and the personality he infused into each location. Unlike the big box supermarkets the U.S. is known for, Trader Joe\u2019s locations come across more like a neighborhood market and meeting space (even though parking in its cramped lots is often problematic). Typical U.S. supermarket chains have stores well over 100,000 square feet. Trader Joe\u2019s stores, though, are usually around 12,000 square feet.

The retailer has managed to succeed by being different. Unlike most supermarkets, it doesn\u2019t prioritize brands with big displays. Instead of sitting in large quantities on store shelves or in back rooms, items are swiftly purchased and replenished quickly. And without middlemen, it can offer both value pricing and a high level of customer service.<\/p>\n\n\n\n

Even during the COVID-19 pandemic, Trader Joe\u2019s remained popular, despite not offering conveniences like curbside pickup or delivery (it also isn\u2019t on Instacart<\/a>). I relied on Instacart for most grocery needs but still stood in long, socially-distanced lines of masked-up people for my weekly trips to Trader Joe\u2019s.

Coulombe died in 2020 at 89, but his legacy clearly lives on in the chain\u2019s 548 stores<\/a>.<\/p>\n\n\n\n

About the Data:<\/h3>\n\n\n\n

Thinknum tracks companies using the information they post online, jobs, social and web traffic, product sales, and app ratings, and creates data sets that measure factors like hiring, revenue, and foot traffic. Data sets may not be fully comprehensive (they only account for what is available on the web), but they can be used to gauge performance factors like staffing and sales.<\/p>\n\n\n\n

—<\/p>\n\n\n\n

Originally Posted on November 22, 2021 – How Trader Joe\u2019s Beat Big Box Supermarkets While Staying True to Its Quirky Roots<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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