Alertness Journal — Trader Joe’s
*AI used to fix grammar mistakes only
I want to start by saying, I LOVE Trader Joe’s. It has morphed into a full on obsession. I can even pin point when this love affair started.
It was during a holiday season 2 years ago, when they just released the Fearless Flyer for the season. As I was out of the ideas on what to cook for Thanksgiving, I started half-heartedly browsing through this old format paper. What sucked me in was the copy writing on this 1000 day aged cheese. I know, what could be exciting about cheese. It’s that old fashioned copy writing that describes the story, the taste, and how it could be the perfect occassion for picky cheese eater. Since I was entertaining a group of bougie family members, I quickly picked that up along with other items. From that day on Trader Joe changed from a simple neighborhood grocery with quirky design to my favorite thing. Yes, I am really a sucker for good copy writing, and probably will buy too much stuff as housewife in the 60s.
No, no, this journal is not about how much I love them, but about how Trader Joe’s is genius at market positioning and has a great understanding of its customer base. They identified their target customer as highly educated & underpaid. This positioning helped them carve out a great niche market and gain a sustainable business model among competitive grocery stores. The interesting part is that they created this market and cultivated an entire business strategy around it.
Joe Coulombe, the founder of Trader Joe’s, is the mastermind behind most of its strategic decisions. So for the remainder of this journal, I will reference him instead of the overall company.
The story starts with the looming threat from a very successful chain called 7-Eleven. It’s probably hard to imagine now that 7-Eleven was a serious challenger to the grocery retail business, but back then, its nimble, franchised convenience store model was impacting the viability of smaller grocers, especially since 7-Eleven had the capital to capture distribution. Joe at this time owned Pronto Market in California, a small grocer that provided a variety of products. Even though 7-Eleven was not yet in California, the threat was coming. He was aware that he didn’t have the money to compete with a powerhouse like 7-Eleven. Given they played in the same space, it was hard to gain market share there. The book talked about how the leader in a category will always have an advantage. Joe carried this understanding too, and he decided to find an uncovered market.
One night, Joe was reading through scientific research journals and learned two important things: 1/ more people in the ’60s would receive a college education thanks to the G.I Bill, and 2/ Boeing introduced commercial planes that would drive down ticket prices for overseas travel. He deduced that the next wave of customers would be more sophisticated and have a more global perspective. Now that he had found his target demographic, he needed to figure out what items he could carry that would serve as a moat against 7-Eleven. The answer was hard alcohol.
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Liquor licenses were highly expensive to get, and under the fair trade law back then, liquor was a highly lucrative item. Most stores carried beer. Joe believed his ideal customer, the sophisticated class, drank more cocktails & spirits. Joe didn’t have to change up the store size to serve liquor, and it improved the overall profitability considerably. It was a big bet, but given he only had a handful of stores then, it was easier for him to do.
He then took steps to change up the overall brand image of the store. To serve this market, he created a new Polynesian, maritime theme. It’s meant to evoke a sense of free spirit, like a trader on the high seas looking for high-value items to bring back to his customers. To this day, the store retains a similar vibe from this conception. Some employees wear Hawaiian shirts. The decor reminds me of a tribal village. They use bells for store communication. The store managers are called captains. Although it might not be very obvious, it’s a subtle message to customers that they will find interesting items. Joe also changed the name from Pronto Market to Trader Joe’s at this time.
I briefly mentioned the maritime theme of a trader on the high seas. What’s interesting is that Joe was able to capitalize on his target customers’ need for value and further differentiate the store as an incomplete grocery store. To remain a profitable business, Joe often found arbitrage opportunities that bigger chains wouldn’t take on. For example, a supplier once wanted to offload a bunch of extra-large eggs to him at a discount. When asked about the reason behind the discount, the supplier shared that bigger chains favor consistency, but extra-large eggs are often the last eggs in a chicken’s life. He couldn’t promise a sustained supply of such an item. These are the types of items Trader Joe’s happily took on, as the customers were there to find high-value items.
These days, Trader Joe’s keeps the spirit of this strategy by offering seasonal items and new innovations to keep customers engaged. It’s always fun to browse their aisles for innovative flavors. I still have to go to other stores from time to time to get everything checked off my list, but I have also started to change my lifestyle around what Trader Joe’s might have to offer. I want to be surprised, as they promise a brand that can deliver high-value items.
This is a good time to talk about the Fearless Flyer. The book mentioned how hard it is to get people’s mindshare these days, especially with the amount of information out there. This is also why I found the strategy to be brilliant. It breaks through the noise, it creates a sense of nostalgia, and, for the highly educated demographic, it offers a chance to read some funny copy. Trader Joe’s Fearless Flyer started off as a newsletter for Joe to talk about the story behind the wine. It’s important to realize that California wine drinking was not really a thing yet. He needed a way to educate buyers. In addition, for all of the quirky items I mentioned above, he needed a way to tell people why they’re interesting, like why they should check out this second-grade butter that’s only available at Trader Joe’s. This long-form, story-based marketing would become the most important vehicle for its positioning. Customers go there to discover interesting items from the trader of the high seas!
The reading suggests it’s hard to make people change their minds. Behavior change is always the toughest part of marketing. Yet, Joe didn’t cause the change; he just felt the shift in this country. He realized the country would want more and different things, and he adapted to that market before anyone else. He didn’t just play the grocery game; he looked at macroeconomic trends for big strategic decisions. In a similar vein, he later moved into health food categories years before Whole Foods, as he noticed the hippie culture popping up everywhere in California. He also always strategically placed his stores near his customers, next to college campuses, and he would drive through the neighborhood to feel out whether his customers were indeed in the area.
They also never neglected the fact that they are a product company. To this day, Trader Joe’s still focuses on its private-label product development. It’s the only grocery store I know that primarily sells its own products. The transition didn’t happen overnight, but Joe realized private label is the best way to control the narrative. Some companies, like Coca-Cola as mentioned in the book, forgot who they were and lost their way. I am most grateful that the subsequent management of Trader Joe’s retained all of Joe’s original strategy that made the place special in the first place. Trader Joe’s creneau was the highly educated & underpaid customer base, and it relentlessly satisfied that market.
A good and genuine positioning feels like magic. It binds a community together. The magic of the store lies in the experience. I once read a book about a terminal patient. She only had 2 years left and told her therapist that she now just wanted to be a cashier at Trader Joe’s. “They always seem so happy,” she said. I believe that a good business has that magical effect. It tells a bigger story than the cash exchanging hands.
Next time you shop at Trader Joe’s, try reading through the labels & pick up a Fearless Flyer. You just might fall in love as well.
