Invaluable Lessons Startups Can Learn from Trader Joe’s, a Food Retailer Who Created a Whole New Category

Invaluable Lessons Startups Can Learn from Trader Joe’s, a Food Retailer Who Created a Whole New Category

Ah, Trader Joe’s!

Ever notice the lines at TJ’s? We’re not talking about the ones at check-out. We’re talking about the ones that often spiral around the block, just to get into the store. You’d think that there was a celebrity inside perusing the avocados.

Hardly. It’s just another day at Trader Joe’s.

Trader Joe’s began in Greater LA as a chain of Pronto Markets, competing with 7-11, until founder Joe Coulombe traveled to the Caribbean and returned with the South Seas motif, renaming and rebranding. Hence the hibiscus logo, in case you were wondering.

He also noticed that Americans were traveling more and returning home with tastes for food and wine that supermarket chains weren’t satisfying at the time. Pay attention to shifting markets and preferences.

The chain was acquired in 1979 by Aldi founder Theo Albrecht, and has been knocking it out of the park ever since:

In 2008, BusinessWeek reported that the company had the highest sales per square foot of any grocer in the United States. Two-and-a-half years later and in 2016, Fortune magazine estimated sales to be $1,750 in merchandise per square foot—more than double the sales generated by Whole Foods.

Despite the fact that grocery stores have been around forever, Trader Joe’s distinguished itself by creating its own category. Unlike Costco, where you can find everything under the sun and which thus created its own distinct category, Trader Joe’s doesn’t sell every item you might need, or 15 brands of yogurt of 10 brands of coffee. They’re selective, and mostly sell the Trader Joe’s brand, which people have come to trust it. And in some cases, will buy exclusively.

It’s simply good stuff.

They’ve also created their own vernacular and culture. They don’t sell cookie sandwiches, a la Oreo’s: they’re Joe-Joe’s Slims. Or For the Love of Chocolate Cake.

And because it’s NY, King Kong is above the banana display, scaling the Empire State Building.

No time or ability to cook? Their On The Run section is for you and as the sign says, No Kitchen Required.

This is not your average food retailer selling your average products, some of which will be discontinued if there is customer dissatisfaction or changes in tastes. Pay attention to your customers’ habits and preferences.

Ever peruse the meat sections? TJ’s tend to offer both cooked and uncooked versions. We live in NYC, where dollars to donuts, we’d wager that the majority of the younger population is no doubt infinitely capable of burning water.

When our friend, who is unaware that such an instrument as a meat thermometer exists, offers to cook us dinner, we don’t check to make sure that all of our inoculations are up to date: we know that she’s a TJ’s shopper and purchases pre-cooked (and pre-seasoned) meats, and perfectly-portioned vegetables that need only be steamed. We don’t trust her culinary proficiency, but we do trust Trader Joe’s.

You can always depend on the products being high quality. They’re not discounted No-Brand suntan lotion. It’s Trader Joe’s and because of the reputation and culture they’ve created, the name has come to mean something.

Most selections are portioned for one or two people, which, in our neighborhood, is pretty much the size of many households, and we personally do own a meat thermometer, so we prefer to season and cook our own meats. Know your audience, be they newbies or more seasoned. Assume nothing. Provide a Help or FAQ section. Or pre-packaged, pre-cooked meats.

As for the other side of the aisle, Trader Joe’s not only offers its employees health benefits: they don’t pigeonhole people. As our friend Benjamin Navi informed us – and a TJ’s employee verified – they rotate positions and responsibilities every hour or two, so that a cashier will also work the floor and back office on any given day. In case you’re wondering why the employees all seem so well-informed. As Katherine O’Neill of New Jersey Jumpstart Angels pointed out at one of our investor breakfasts, all of your employees need to be able to describe your company and be knowledgeable about it. As a TJ’s employee said, when we asked her why she was happy in her job, “if I have a question or don’t know something, someone will give me the answer or patiently explain something to me.” Don’t treat you’re people as if they’re idiots: is the problem really with the employee, or the manager? Or you?

Christian, who was our cashier one morning, was not a happy employee.

“It’s a paycheck,” he said, unfazed by the opportunity of working multiple positions. “I just want to start my own company,” he admitted, but still had bills to pay. Don’t quit your day job until you have a plan and preferably, some means of survival.

TJ’s is not an online retailer, although the TJ’s story is there on their website, along with the Fearless Flyer, informing shoppers about new items, and recipes – with all ingredients available in the store, of course. Always a plus to focus on sales and self-promotion.

If one can’t find an item in the store, any employee will no doubt be able to point you in the right direction. Site maps are always handy. So is a help desk or live chat.

They also strive to keep costs of items down, without compromising quality, while in tech, for example, that might not be the case and in fact, Some Samsung Phones Aren’t Letting Users Uninstall Facebook Completely. Buh-bye.

When TJ’s is introducing a new product or wish to bring awareness to a particular product, they feature it at their sampling table, and offer a very small portion for customers to try – with a display on hand, in case the sample converts to a sale. Note to self: they give away a small sample, not the entire package. Great testing ground, and extremely limited freemium model.

If one purchases an item and decides it’s not up to snuff, TJ’s will take it back, even if it has been opened, and issue a refund. If an item is damaged, they’ll happily replace it. A happy customer is far more likely to be a returning customer.

In all fairness, Amazon gets that right, too – they will happily allow you to return a damaged or inappropriate item. Customer service is a big one, and while TJ’s may not be the only retailer that gets it right, despite the fact that they don’t deliver and they don’t offer online shopping, we happily return time and again, often choosing TJ’s over other chains, truth be told. Their going that extra mike to make the shopping experience an easy and pleasant one does keep their customers coming back.

Trader Joe’s created a category (unique, affordable ‘specialty’ foods) where one didn’t exist, much the way Amazon did for online shopping, eBay did for auctions and Uber did for ride-hailing. It was a much more difficult undertaking to do when it came to a grocery store. But TJ’s doesn’t look or feel like any other grocery chain, and features products you can only get by going to TJ’s (save for the few that are available on Amazon) and that keep people not only coming back, but to the point where they will line up around the block, just to get in.

They’ve proven one thing for sure, and a good point for every startup to keep in mind, whatever the differentiators may be: They’ve made the hard choices, pivoted, paid attention to the market and created a their own category in a very saturated market. You can do it, too, and remember: there are far more opportunities to do so in tech, as it’s still a relatively new field. But the very first step is to follow TJ’s lead and decide that you’re not going to be another variation on a theme, or worse – just your average Joe.

Onward and forward.

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