Trader Joe’s is a public phenomenon with a very private personality. Here’s a story you won’t see anywhere else: data about Trader Joe’s stunning growth, my recollections of its early days, and a photo appreciation of its local presence.
No, I didn’t pump the employees for information or hack their headquarters computers. The numbers I present are compiled from many articles, each one of which leaked a tiny bit of data about this secretive company. To these I’ve added my own memories.
Digression #1: today’s blog owes a debt to W. Scott Walker, whose book As I Remember: A Walk Through My Years at Hughes Aircraft 1961-1997 taught me a wonderful way to write history. What a brilliant idea! Scott disabled all niddling complaints about accuracy by saying, in effect: This is how I remember it – if you think I’m wrong, why don’t you write your own book?
I’ll start with my personal memories of Trader Joe’s earliest days; then tell you the revealing data about its stunning success; then show you how it wins the hearts and minds of customers at the very local level.
Note added May 7, 2018: If this article doesn’t tell you enough, on May 1 Trader Joe’s released a new source. There’s now a five-part podcast that goes behind the scenes at Trader Joe’s. You can listen to it in your car or (my preference) read the accompanying transcripts. There are cameos by “team members,” customers, executives and of course Joe himself! I recommend it for your listening or reading pleasure.
Trader Joe’s: Art’s Early Memories
I attended graduate school at Caltech from 1961 to 1965. During that time I lived in Pasadena, San Gabriel and Malibu. I knew of Pronto Markets as a handful of convenience stores in and around Pasadena. Convenient for an off-hours grocery run, since major supermarkets seemed to keep “banker’s hours.” These were the stores that turned into Trader Joe’s beginning in 1967.
After graduating I worked at Bell Labs in Murray Hill, New Jersey, returning to California and Hughes Research Laboratories in 1969. Although living in Malibu put me many miles away from Pasadena, two circumstances made me very aware of the growing Trader Joe’s chain.
The first factor was the close relationship between HRL and Caltech: many of my HRL colleagues had attended Caltech and found frequent reasons to journey across the county to Pasadena. And those friends enthusiastically talked up Trader Joe’s. Joe Coulombe had renamed the stores as his own and greatly expanded their stock in two specific areas: wine; and nuts and other snack foods. These specialties immediately distinguished Trader Joe’s from the competing 7-Eleven convenience stores, which at that time were rapidly spreading throughout Southern California.
My friends said that Joe would frequently drive to California’s wine country around Napa, visit small wineries that no one had ever heard of, and stuff his car with as many cases of bargain wines as he could fit. His car would stagger back to the Southland, where Joe would unload all the wine to form a single store display adorned with giant signs.
It was a great adventure for the customer: you knew the wine was priced ridiculously low, but you could never know in advance whether it would be delicious or undrinkably bad. So my friends would buy a bottle, take it home and sample it; if they liked it, they would hurry back to the store to buy a case of it, because once it sold out you would never see it again. Especially compulsive friends (of whom there are many among Caltech physics grads) would not even bother to go home: they would sit in their parked car to taste the wine, then rush back inside the store to stock up.
The other factor that raised my awareness of Trader Joe’s was KCET, which was then Southern California’s principal public television station. KCET was a charter member of the Public Broadcasting Service and was one of the nation’s most-watched PBS stations. During the 1970s KCET was supported by a large cadre of volunteers, several hundred at least, who would raise funds and otherwise help the station. A major fundraising activity was the station’s annual on-the-air auction: celebrities and just-plain-folks like me would answer phones and trundle merchandise to be sold off, including one-off items like the shirt off Howard Hughes’ back.
My then-wife Kitty (Catherine Buchanan) and I were active volunteers at KCET and at their events we met many movers and shakers from the Pasadena area. Among them were Joe Coulombe and his wife, whose name I omit in respect of her privacy. Joe participated in KCET events as much as he could, but often he was busy with his stores. Thus we had much more contact with Mrs. Coulombe, who was (and is) a lovely lady. Joe lived and breathed his business, with 100% commitment. In later years I came to recognize this as a universal characteristic of fabulously successful entrepreneurs – as well as of many who only strive to be fabulously successful.
Trader Joe’s: The Real Facts
This section summarizes what I’ve learned about the birth and growth of Trader Joe’s from far-flung public sources. For convenience, the references for this section are gathered at the end of this blog.
Joe Coulombe graduated from Stanford University in 1954 with a Master of Business Administration degree, long before most people knew what an MBA was. He went to work for Rexall Drugs and was such a bright star that after only three years, the company charged him with opening a chain of convenience stores to diversify their business in Southern California. Joe created Pronto Markets and built them into a chain of 6 stores by the time Rexall decided that they really didn’t want to be in the grocery business and told Joe to shut them down.
Joe took a long vacation in the Caribbean and pondered what to do. 7-Eleven was expanding in the Los Angeles area, providing well-financed deadly competition for convenience stores like Joe’s. He needed to chart a new direction.
Two news items provided Joe with inspiration: a Scientific American article about the increasing popularity of college education; and Boeing’s new 747 aircraft, which would make foreign air travel widely affordable. Joe felt that well-educated people would return from their overseas adventures with a taste for exotic foods that their local supermarket couldn’t satisfy. Joe resolved to target this growing demographic. As he said in a later interview:
All Trader Joe’s were located near centers of learning. Pasadena, where I opened the first one, was because Pasadena is the epitome of a well-educated town. …Trader Joe’s is for overeducated and underpaid people, for all the classical musicians, museum curators, journalists…
In the early 1960s, Polynesian-themed “Tiki” bars and restaurants(https://en.wikipedia.org/wiki/Tiki_culture) were popular, headlined by competition between Hollywood’s Don the Beachcomber and Trader Vic’s restaurants. If Joe was going to search far and wide for exotic foods for his stores, Trader Joe seemed like a name to give his business. Joe enhanced his stores with nautical décor – fish nets and plastic lobsters – and the employees wore Hawaiian shirts.
Digression #2: A 2014 article asserts that every Trader Joe’s store has a plastic lobster, somewhere in the store. I engaged some team members in conversation in our local Grosse Pointe Trader Joe’s and learned the following: At one time, whenever a new Trader Joe’s store opened, the corporate office would give them a plastic lobster. It did not have to be displayed – in at least one store, it was generally kicking around in the stockroom. However, employees present for the Grosse Pointe opening assert that they never saw a plastic lobster, nor have they seen one since then. Through the years, Trader Joe’s has backed off from Tiki and island décor, especially outside California, in favor of local themes in each store. Thus the lobster has apparently become optional for new stores.
Note added May 18, 2018: Last week while shopping in our local Trader Joe’s store, Nola and I noticed a stuffed plush lobster. It was good-sized, perhaps thirty inches long. The lobster was draped across a display of watermelons. So I stand corrected: yes, our local store is not deprived of its heritage: it does have its own lobster!
In those first days, Joe Coulombe had no money to pay commercial artists, so Trader Joe’s ads were assembled from copyright-free Victorian magazine illustrations. Those days were pre-Photoshop, so ads were assembled with scissors and Scotch tape. Quaint period drawings still adorn the company’s advertising brochure, the Fearless Flyer:
For a long time Trader Joe’s was strictly a Southern California chain. It took 21 years before Joe opened the first store in Northern California in 1988, and another five years to reach out of state, to Phoenix, Arizona. By this time the company had experienced major internal changes. Joe sold the Trader Joe’s company to German grocery magnate Theo Albrecht in 1979. Joe continued as CEO, then handed that job to his long-time associate John Shields in 1987. Joe himself retired a year later. Don Bane became CEO in 2001 and continues to hold that job. Theo Albrecht passed away in 2010 but Trader Joe’s continues to be owned by his family trust.
Trader Joe’s has evolved in sync with its educated and socially aware customer base. It doesn’t sell Coke or Fritos, or saucepans or mops. Instead, it offers good food at a fair price. As a bonus, its products are environmentally friendly and healthy, including no-hormone meats and dairy products, no trans fats, and a number of organic options. Here’s a typical signpost, in this case above a cheese display:
Trader Joe’s is not only privately held, it’s private in personality as well. Eighty percent of its products are Trader Joe’s branded and its suppliers are forbidden to reveal that they produce for Trader Joe’s. This strict secrecy rule helps the company in several ways:
– Major companies are willing to sell products to Trader Joe’s at a steep discount so long as the relationship is never revealed; they can fill their excess production capacity without ruffling their regular wholesale customers.
– Small companies making outstanding products find Trader Joe’s a loyal customer that pays its invoices promptly; however, since Trader Joe’s is not letting them advertise the connection, these suppliers are less likely to become so successful that they start jacking up their prices.
– Customers associate the Trader Joe’s brand with quality foods and come to prefer it to the national brands that may in fact be identical goods!
Although Trader Joe’s is close-mouthed, over time they have given tantalizing glimpses of their operating numbers, including the following nuggets:
– Trader Joe’s now has stores in 41 of the U.S. states plus the District of Columbia. Alas, there are no stores in Hawaii despite the Aloha shirts on the employees. Wherever Trader Joe’s has no stores you will still find their merchandise in the grey market: there’s a re-selling grocer in Vancouver called “Pirate Joe’s“, and highly-marked-up goods are re-sold through Amazon.com and eBay.com.
– Trader Joe’s revenue in 2014 was $9.38 billion with net income of $578 million. The company is very similar to Whole Foods in size and profitability.
– Trader Joe’s average store size has grown from 6,000 to 11,000 square feet over the years; those square feet generate $1,750 in sales per year, a very high number for the grocery business.
– A Trader Joe’s store stocks a much narrower range of products than a supermarket – typically 4,000 SKUs (stock keeping units) as opposed to 40,000; this drastically reduces Trader Joe’s operating costs. Despite the scarce SKUs, in selected departments Trader Joe’s puts their competition to shame, as we will see.
– Trader Joe’s uses only two distribution centers: in Chino, California to serve stores in the western half of the U.S., and in the Boston area for the eastern half. Although shipping to Texas and Florida is challenging, centralizing distribution in this way improves the firm’s operational efficiency.
One measure of Trader Joe’s business is quite visible: the number of stores. That’s the measure for which I have the most data, enough data to plot as a function of time:
I have tagged this plot with three key events in Trader Joe’s management. The sale to Albrecht provided Trader Joe’s with a strong source of capital to expand their business without taking on debt. Joe’s handing of the reins to John Shields was immediately followed by expansion outside California. And Dan Bane’s administration has featured an even more rapid rate of store expansion, although some grumble that the company’s culture has become more “corporate” now. That might explain why Trader Joe’s ranked number 9 on the Best Places to Work for 2012 (above Apple!) but has fallen off the top 100 list for 2016.
Trader Joe’s: A Grosse Pointe Diary
During my years as a resident of Malibu, California my closest Trader Joe’s store was in Santa Monica, requiring most of an hour’s drive in each direction, negotiation of a tight upper-deck parking lot, and often a long wait in the checkout line. As 2008 approached, Nola and I were living both in Malibu and in Grosse Pointe, Michigan. Imagine our delight when we learned that not only would there be a Trader Joe’s store in Grosse Pointe, but it would be only a five-minute walk from our home!
Trader Joe’s occupies a large portion of the former Jacobson’s department store. It has tall signs at the front of the building, on the main street Kercheval Avenue:
The store itself is hidden on the backside of the building, next to the parking structure. Trader Joe’s traditionally sites its stores on lower-rent property, figuring (correctly) that its targeted customers will find a store wherever it is located:
Trader Joe’s must have resolved to “go local” with their Grosse Pointe store because it’s as Grosse Pointe-y as it could possibly be:
Little kids are offered kiddie-size shopping carts to shop with, and given stickers at checkout. As noted above, the Grosse Pointe store doesn’t seem to have a plastic lobster; however, it has a stuffed toucan toy which is moved around the store. Kids who find the toucan are awarded a lollipop or additional stickers.
Older children are not neglected either. Both high schools serving the Grosse Pointe communities are honored with banners above the crackers and chips:
Near the registers are large murals of local scenes. This one shows Lake St. Clair, bordering Grosse Pointe, being plied by an imaginary freighter bearing a Trader Joe’s logo:
Lest it be thought that Trader Joe’s can now afford an army of professional artists, this billboard proclaims that all decorations are the work of local team members:
Just as this store is unmistakably Grosse Pointe, it’s also unmistakably Trader Joe’s. Every team member is genuinely friendly and appears to have been selected for “niceness” as well as competence. Every employee, like this checker, sports a Hawaiian-themed T shirt (managers wear full-flowered Aloha shirts):
True to its heritage, this Trader Joe’s has an immense selection of nuts that fills an entire wall:
Most of the products offered are Trader Joe’s private label. These international coffees are three of 43 different coffees offered in this store (accompanied by 29 teas and 3 cocoas):
Several years ago I asked a manager in a Whole Foods for some no-hormone (rBST-free) cheese. He told me that they are simply unable to offer hormone-free cheeses “due to the structure of the wholesale cheese market.” Trader Joe’s makes a lie of that statement by offering not just one or two, but a huge variety of hormone-free cheeses in every store. Nola and I counted 157 different SKUs of cheeses in this Grosse Pointe display:
Shelf tags for organic products helpfully put “Organic” as the first word on the sign. Costco has the same signage policy but many fewer organic products.
Of course, Trader Joe’s has its peculiarities. For the first seven years of this store’s existence they never sold radishes, but then they started offering them last year. And you can’t buy just one jalapeño – no, you’ve got to buy an eight ounce package of them!
Trader Joe’s: A Final Appreciation
Trader Joe’s is amazing in many ways. It is one of those rare companies that inspires fanatical customer loyalty. And it stands as a personal tribute to the brilliance of its founder, Joe Coulombe.
Consider this: barely out of university, Joe created a chain of small grocery stores from scratch. Faced with competition, he correctly identified an important new market and re-created his stores to address it. He then performed a set of miracles: he offered unique products at attractive prices; he gave his employees better pay and benefits than his competitors; and he still managed to achieve such good earnings that he kept opening new stores using internally generated capital.
Joe taught himself print and radio advertising, wine appreciation, importing, product discovery and many other skills, simply out of the need to offer his customers the best possible experience for their money. His achievements continued after he retired, because he had the prescience to choose an owner and a new CEO who had the sense to build on and extend Joe’s exceptionally astute business model.
Trader Joe’s is our family’s favorite food market, as you can probably tell. If you have a Trader Joe’s near you, what do you think of it? If you don’t have one nearby, I must offer you my heartfelt sympathy…
Image Credits: photos of Trader Joe’s, Grosse Pointe, Michigan by Art Chester
Sources for “The Real Facts” Section:
– 13 Facts About Trader Joe’s You Probably Didn’t Know (Wall Street Insanity)
– 8 Things You Need to Know Before Shopping at Trader Joe’s (Kiplinger)
– A Week In The Life Of A Trader Joe’s Employee (Huffington Post)
– History of Trader Joe’s Company (Funding Universe)
– Innovation arises in tough economic times (Pasadena Star News)
– Inside the secret world of Trader Joe’s (Fortune 1)
– Joe Coulombe – Wikipedia (Wikipedia 1)
– Meet the original Joe – Fortune (Fortune 2)
– Patt Morrison Asks/ Trader Joe’s founder Joe Coulombe (Los Angeles Times)
– Stanford Business magazine, February 2006 (Stanford University)
– The Trader Joe’s Story/ Building a Brand, One Store at a Time (Martha Spelman)
– Trader Joe’s – Wikipedia (Wikipedia 2)
– Trader Joe’s Atlantic Overtures (Bloomberg 1) (Note: As of Aug 26, 2017, Bloomberg has restricted this article to their subscribers.)
– Trader Joe’s Timeline (Company Website)
– Trader Joe’s/ The Trendy American Cousin (Bloomberg 2)