Trader Joe's Recipe for Success

(page 2 of 2)

Beyond that, though, the company is loath to talk about itself or its private-label suppliers. That hush-hush strategy is a two-way street. "Their suppliers simply don't talk to anyone about the company," says W. Frank Dell, a food industry consultant in Stamford, Conn. "They love the company. They are great to work with and pay their bills on time. They don't tell the outside world they have Trader Joe's as a customer."

Other supermarket chains such as Kroger (KR) and Safeway (SWY) have caught on to the private-label strategy, offering more prepared and organic foods. But Trader Joe's still manages to keep things fresh, introducing limited runs of Candy Cane Joe-Joe's cookies at Christmas that look like Oreos but taste like Girl Scouts' Thin Mints. "They're like a shark, they have to keep moving," says Len Lewis, who wrote a book, The Trader Joe's Adventure, about the company. "But they are very good at it, and now they have companies coming to them with new products."

Shopping at Trader Joe's isn't always a bowl of cherries. Parking at their urban locations is usually a challenge. Since the stores tend to be on the small side—less than 15,000 square feet vs. 50,000 or more for conventional supermarkets—the lines can get long and the space cramped, especially on weekend afternoons.

Satisfied Workers

That's where another distinctive feature of Trader Joe's comes into play, its cheerful employees. Coulombe says he tried from the start to make Trader Joe's a place where people would enjoy coming to shop. Inspired by a trip to the Caribbean, the book Trader Horn, and the dawning of the jet age, he sought to make a shopping excursion resemble a vacation. Employees wear Hawaiian shirts, hand out food and drink samples from little tasting huts, and employ nautical terminology. Store managers are called captains, for example; assistant managers are known as first mates. The stores themselves look rustic, covered with cedar plank walls, for example, and hand-painted signs.

Ask a Trader Joe's employee about a product and he will practically sprint down the aisle, grab a bag of whatever you had questions about and join you in a taste test. And returns? No questions asked, even if the goods have been opened and you simply didn't like the product. "The people who work there are just wonderful," says Ruth Leibowitz, a dance instructor from Ridgefield, Conn., who watched a Trader Joe's clerk dart to find her a bottle of the house brand (Trader Zen) ibuprofen during a recent trip.

Coulombe also wanted to make sure his employees were paid fairly, instituting a policy in the 1960s that full-time employees had to make at least the median household income for their communities—an average of $7,000 a year at the time, $48,000 today. Store captains, almost all of whom are promoted from within, can make six figures annually. Trader Joe's also allows part-timers to earn health-care benefits, a feature that makes the store a haven for artists, musicians, and other creative types who wouldn't normally seek supermarket jobs.

A Successful Formula

Now 77 and retired, Coulombe sold Trader Joe's in 1979 to privately held German supermarket giant Aldi. The German owners have let the chain run more or less autonomously, keeping many of the original strategies in place.

Unlike most supermarkets, for example, Trader Joe's doesn't accept coupons, collect customer shopping info from loyalty cards, or feature weekly sales. 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.

Back to Customer Service Champs Table of Contents

Business Exchange related topics:
Supermarkets
Niche Marketing
Customer Value
Customer Service Marketing

Palmeri is a senior correspondent in BusinessWeek's Los Angeles bureau.