3 Key Tactics that Retailers Should Learn from Trader Joe's

Trader Joe's is a supermarket chain with over 340 stores in 25 states.  It is arguably one of the most successful supermarket chains in the US, having higher sales per square foot than the likes of Whole Foods.  Fast Company magazine named it among the 10 most innovative retail companies in 2011.  In this post I will analyze what are the keys to its success and what other retailers can learn from it.

Trader Joe's delivers a unique customer experience to their customers by providing a small market atmosphere that induces comfort and trust.  Here is how they achieve that atmosphere and that trust:
  • Innovative Concept - Trader Joe's concept is to develop supermarkets that have a neighborhood feel, offering exclusive products at competitive prices.  To be able to successfully execute that concept they have adopted a simple model.  The CEO sums it up simply: “taste, quality, private labeling and price”.  They work with a select group of smaller suppliers and purchase big quantities securing large discounts.  They also carry 5 times fewer products than a regular supermarket, ensuring a higher turnover and a constant change in product mix.  They do not stock any item that is regarded as a commodity, like soda, as it is available anywhere and, therefore, does not differentiate Trader Joe's offering.
  • Store Design - Its stores are relatively small when compared to other supermarkets.  They all feature a South Seas motif.  The staff often wears Hawaiian shirts and banners throughout the store convey that theme.  New products are identified on chalk boards arranged in key locations.  All these features strengthen the small market concept and enhance the cozy and comfortable atmosphere.
  • Customer service - The staff, or "Crew Members", are extremely knowledgeable and personable.  They are allowed to open and let the customers sample any product in the store.  They are also encouraged to freely suggest or criticize any item.  They, as well as the store manager or "captain", are trained to listen to the customers and can e-mail directly the buyers to ensure that the product mix in each store matches perfectly the local demand.  These actions are essential in increasing the trust that consumers have in the store, in promoting its neighborhood market atmosphere, and in delivering a superior customer service and experience.

I would have to agree with Fast Company magazine that Trader Joe's deserves to be considered one of the most innovative retailers in the US.  Innovation is not only achieved by reaching a break-through in an existing industry or by inventing a new industry altogether.  It can also be accomplished in mature industries by delivering a new and engaging experience to the customer.  I explained how to do that in my post How to Create a Unique and Engaging Customer Experience and Trader Joe's is one excellent example.

However, let's see what are the most remarkable features in Trader Joe's strategy that can be interesting to other retailers as well. 

  • Differentiate your product offering - Trader Joe's does not offer commodities like soda.  All retailers should likewise try to be as unique as possible in their offerings.  However, many retailers currently prefer to just carry the same brands as the store next door rather than risk something new.  Among others, it is apparent in the jewelry industry, which I know well.  In fact, most high end jewelers stock the same more renowned brands.  They think that choosing well publicized and well distributed products would minimize their risk.  However, it actually puts them in a vulnerable position where they only provide a "commodity" offering.
  • Partner with vendors - Trader Joe's partners with smaller vendors to acquire exclusive products at lower prices.  Other retailers should also consider this strategy.  While Trader Joe's model requires a considerable investment in inventory, in some other industries the strategy could be modified to fit the needs of smaller retailers.  Taking the jewelry industry as an example again, jewelers could partner with smaller vendors, offering a branded corner in their shops and gaining in return better terms, lower prices, exclusivity in their area and an additional selection of consignment jewelry that would change periodically, keeping their offering always fresh.  ZYDO, the jewelry brand I managed, has done that with a number of retailers around the world, achieving mutually great results. 
  • Deliver Outstanding Customer Service - I mentioned this point already various times.  But it is worth repeating again.  A great customer experience is the result of many different factors, which I have discussed in many posts.  However, outstanding customer service is the most important of those factors and it is the result of careful planning and training.

Depending on your store concept and industry, these tactics' usefulness could vary.  However, it is certain that in today's ultra competitive marketplace, only innovators in their respective industries will be successful in the long run.  Subscribe to this blog and get weekly ideas that you could utilize in your business to develop a truly unique retail concept.

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