15 Jan 2012

The Saga of Trader Joe’s

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When I was living a few years ago in the Bay Area of Northern California, I often divided shopping expeditions between Draeger’s (a sort of West Coast Zabar’s, a high end butcher shop-cum-gourmet food store) in San Mateo and Trader Joe’s in Foster City.

No matter how little I bought at Draeger’s, I marveled to find that the cash register receipt never came in under $100, while two or even three times the volume of purchases from Trader Joe’s often came in under $40. “These things even out.” I used to assure Karen.

Just the other day, I finally got to a Virginia branch of Trader Joe’s in Centreville. We residents of the real Northern Virginia make a point of avoiding entering the soul-destroying, built-up, suburban areas outside the District, referred to around here as “Occupied Virginia,” but Centerville is just at the edge of the suburban Erebus, and cases of Two-Buck-Chuck (priced on the East Coast at $3.29 a bottle) will definitely justify the occasional expedition.

Los Angeles Magazine has a long feature this week revealing the mysterious origins of the Counter-Culture’s favorite grocery store (which even some of us conservatives like).

Coulombe guessed he had less than a few years to think up a concept that could compete. Luckily, he was an avid magazine reader. In Scientific American he learned that a new class of overeducated, underpaid adults was being produced by the burgeoning college system. Sophisticated shoppers were not necessarily wealthy shoppers, Coulombe theorized; they were educated buyers trapped in economic stasis. He decided to mate the convenience store with the liquor store, and that was Trader Joe’s, “Phase I.” His customers would be the classical musician, the journalist, the teacher, the young doctor. In a different article Coulombe read that the more education a person had, the more they drank, so he stocked 70 bourbons and about 100 scotches. (“I had penciled out what a union journeyman made to figure what I would pay my employees,” he says, “and adding liquor was the easiest way to fund those wages.”) Coulombe read about a jet known as the 747 that promised inexpensive air travel to Europe; Trader Joe’s would need to broaden its tastes to match the new traveler. In another magazine Coulombe discovered that the earth’s biosphere was threatened. Overnight, he says, he became a self-professed “Green” and spliced the health food store and the gourmet store onto Trader Joe’s. This was “Phase II” of Coulombe’s company.

Finally, Coulombe gave Trader Joe’s something most grocery chains didn’t have: a personality. It would have its own take on the world—cultivated but casual, spontaneous, moderately liberal, and smart. When you walked into a Trader Joe’s, you would know the store’s tone and its attitude. The personality that Coulombe conceived remains to this day the company’s voice: The Fearless Flyer.

Coulombe continued to tinker with Trader Joe’s. In 1972, he devised what he calls “Trader Joe’s, Phase III.” At that time the trend in grocery merchandising was bigger. Throughout the ’70s, supermarkets were headed toward becoming the 40,000-square-foot behemoths of today that can carry 50,000 items. Yet such steroidal markets would encounter drawbacks to their muscled dimensions. Eighty percent of supermarket shopping time is spent moving from product to product. Half of all store trips are for five purchases or less, and customers on such trips aren’t searching for sale items—price does not alter the behavior of someone looking for only a handful of things. What did this mean for supermarkets? As their floor plans expanded, their sales volume per square foot shrank. They were forced to invent new schemes to compensate for lost profits, charging fees to manufacturers for store placement and “floating” cash (earning bank interest on the daily take).

So once again Coulombe thought small. Instead of 50,000 shelved items, he would drop his number from 6,000 to 1,000. If supermarkets sold 20 kinds of cat food and 40 detergents, he would sell one of each. In doing so, Coulombe maximized the velocity of dollars entering his registers. Shoppers moving 5 feet between purchases instead of 50 pass through a store more quickly, leaving more cash behind. The average supermarket brings in $10 million to $30 million annually in sales. A Trader Joe’s one-fifth the size of a supermarket can make $1 million in a week’s time. Square foot for square foot, that Trader Joe’s outperforms an average Walmart, which would have to do $30 million in business to match it during the same period.

“I took her down to the rocker arms,” says Coulombe, describing the work he did in the late ’70s. “That’s the Trader Joe’s you know today.”

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3 Feedbacks on "The Saga of Trader Joe’s"

alexa

There is no trader joes in foster city



JDZ

You’re right. It was lower down in San Mateo. The Whole Foods was in Foster City.



Alexa

Whole Foods is in San Mateo also



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