Trader Joe’s success comes from a mix of atmosphere and product selection, but the company is secretive when it comes to touting or explaining store operations. Because many—from rival retail chains to its own shoppers—want to know the “secret world of Trader Joe’s," Beth Kowitt and other reporters from Fortune Magazine spent two months speaking with former executives, competitors, industry analysts and suppliers, most of whom asked not to be named, to get the inside scoop.
Trader Joe’s has 344 stores in the United States, which are highly profitable for the owners—the Albrecht family, who also own the Aldi Nord supermarket empire in Germany. Last year, Trader Joe’s sales equaled Whole Foods.
Kowitt said its management is “obsessively secretive" when it comes to business tactics, which is an extension of the Albrecht’s values. They are known to be tight-lipped, and don’t interact with the press.
The grocery store’s ambience is a huge drive for business, and this is helped by the way its employees are treated, according to the article. Managers can make in the low six figures, and full-time crew members can start in the $40,000 to $60,000 range, and on top of that, Trader Joe's annually contributes 15.4 percent of employees' gross income to tax-deferred retirement accounts. Happy employees make for better customer service.
In the report, Kowitt discovered Trader Joe’s sells about 4,000 SKUs, and about 80 percent of the stock bears the Trader Joe's brand. Typical grocery stores can carry 50,000 SKUs. For Trader Joe’s, this results in an estimated $1,750 in merchandise per square foot, more than double Whole Foods'. Also, she noted the company has no debt and funds its own growth.
Shoppers don’t seem to mind the smaller selection because they trust Trader Joe’s to offer quality products. Studies have shown more selection doesn’t mean a shopper is more willing to buy, and shoppers at Trader Joe’s believe it only offers two choices of a product because those are the best options available.
To find these few products, Trader Joe's has four top buyers, called product developers, who travel quite extensively looking for new offerings, according to Kowitt. She said Trader Joe's biggest R&D expense is travel for those product-finding missions.
Kowitt suggested the company may be so quiet about its strategies is because some of them are at odds with its image. Many big companies produce its private label brand. For instance, instead of selling locally grown food, Stacey’s, a division of PepsiCo'sFrito-Lay makes its pita chips, and Danone’s Stonyfield Farm is behind a number of its dairy products.
Trader Joe’s doesn’t want its shoppers to know its artisan products really come from large corporations, and the suppliers don’t want their consumers to know their name-brand products are sold as a much cheaper price under a private label brand. Therefore, everyone in the deal keeps quiet, noted Kowitt
As Trader Joe’s grows, and more reports like this one are made public, Kowitt said it may be difficult for the company to keep its neighborhood-store images. Former employees quoted in the article said the company is becoming more corporate as it grows. But, so far, it is still popular as it stays ahead of American’s desire for organic and artisan foods.
In addition, the article provides a brief history of the company from the founding 43 years ago by Joe Coulombe to Albrecht’s purchase in 1979 to today, now run by CEO Dan Bane. It also explores Trader Joe’s distribution methods, which is focused on using as few stops as possible, and helps determine where new stores are opened.