They just have those random little things that you didn’t really know you ever wanted and then can’t somehow live without. Today we are going to Trader Joe’s. Trader Joe’s. Trader Joe’s. Trader Joe’s. The gingersnap cookies. The babka is unbelievable. Coconut rolls. Those are my favorite things I’ve ever had in my life. The little signs with the corny jokes on them. Is that crazy to say like it just has a better vibe? People love Trader Joe’s. They really do. Welcome to Trader Joe’s, where super friendly workers help you shop for things like kale gnocchi and vegan tikka masala. Trader Joe’s calls itself your neighborhood grocery store, except it’s grown way beyond your neighborhood to over 500 stores nationwide.The late founder Joe Coulombe opened the first location in Los Angeles County in 1967. He then sold Trader Joe’s to grocery giant Aldi in 1979. The quirky grocery brand hasamassed a cult following among health and value conscious shoppers. It’s so addicting. Prices and quality put together is unmatched pretty much anywhere else. Experts estimate Trader Joe’s outsells all of the competition when it comes to sales per square foot. The company brought in estimated total sales of $13.7 billionin 2019. I’m at Trader Joe’s right now. The fan fervor around Trader Joe’s has consumers begging for more, even starting petitions for new locations. There are none nearby. And I’ve begged and beseeched. There are even Instagram influencers dedicated to Trader Joe’s products. In terms of overall customer satisfaction, Trader Joe’s was the highest ranking national brand in Consumer Reports’ 2019 ranking of grocery chains. Customers report high levels of satisfaction despite the fact that Trader Joe’s is not necessarily convenient or a one-stop shop. It has a limited selection of meat, produce and toiletries, and there’s no deli, self-checkout, online shopping or delivery service.Sometimes I feel like they’re missing key things that you need to like make dinner. I get it.I know I could get a larger and more affordable selection of my diet staples like meat and produce somewhere else. In fact, I live right next door to another major grocery store.But twice a month I travel 100 blocks to shop at Trader Joe’s on72nd and Broadway in New York City. I wait in massive lines at what’s officially the busiest Trader Joe’s in the United States. Then I carry two heavy bags up and down four flights of stairs between the subway and my apartment. Trader Joe’s may not be the very best all around grocery store, but it’s not trying to be. The company does certain things so well, it’s built one of the most passionate fan bases in the grocery business. Here’s how. The thing that’s preposterous, right, is it’s the anti grocery store. I often say imagine that I was pitching to investors the concept of a new grocery store. And I said, we’re gonna have virtually no branded goods. Nothing’s ever gonna be on sale. There’s no coupons. There’s no loyalty card. No self-checkout. We’re going to have cramped aisles and small stores with limited selection. No TV ads. Would you invest? And people of course go, “No. That sounds crazy.” Trader Joe’s doesn’t draw customers in with wide shiny aisles or high tech shopping. The company does minimal marketing and didn’t have a social media presence until just a few years ago. Trader Joe’s presents itself as a quaint local store. Everything is hand-drawn, handwritten, and that gives the store a very kind of low-key personal feeling. It also gives a feeling that you’re kind of in a market or a local store that is not overly commercial. Trader Joe’s has I think really captured the culturalzeitgeist in a way as far as not only tapping into the foodie culture, but then also kind of the movement away from traditional and established national or global brands and overly processed or produced food. The neighborhood market atmosphere helps shoppers feel that they’re making healthy and environmentally friendly choices. In terms of sustainability,people have this warm, fuzzy feeling and it’s kind of reflected in the packaging. Mark Gardiner is a former marketing executive who became intrigued by the Trader Joe’s brand. So he worked as a crew member, stocking shelves and ringing up customers at a Kansas City, Missouri location for a year starting in 2011. Then he wrote a book about it called Build a Brand like Trader Joe’s. Gardiner says Trader Joe’s might look like a local store, but its environmental impact is not necessarily better than other grocery chains. When I worked there, we had a product that was naan bread and the naan bread was baked and frozen in India and shipped frozen to Trader Joe’s stores. That’s pretty crazy. You can bake naan bread anywhere. Trader Joe’s has made efforts to be more environmentally friendly, sometimes when under public pressure. Trader Joe’s may not operate just like a local market. But the experience of being at one helps us feel good about our shopping decisions. The unique products that are only available at Trader Joe’s. Zhoug sauce. Haven’t seen that anywhere else except Trader Joe’s.Teeny tiny avocados. I feel like nobody else has those little avocados. Trader Joe’s presents itself as a local store, but one with worldly connections. Founder Joe Coulombe gave the store a south seas theme, complete with Hawaiian shirt clad employees who are called captains and crew members. The theme plays upon the idea of merchants sailing the oceans to bring home diverse foods from around the world. Trader Joe’s product developers travel the world seeking inspiration for these recipes. They discuss trips to NewZealand, Japan, the Republic of Georgia and beyondin an episode of the official company podcast. They present their products as if they are local discoveries, something that someone found when they were, let’s say, traveling Italy and they’re now bringing it to you. The result?Trader Joe’s products feel specially sourced, truly unique, and like they can’t be found in other grocery stores. The products seem even more one of a kind due to a generous use of descriptive adjectives. They don’t just have cheddar cheese. They have Wisconsin farmhouse cheddar cheese. Or, you know, their gummy bears aren’t just gummy bears. They are fish shaped. And so they’re called Scandinavian swimmers. Customers want to feel like they are smart shoppers. If you can make them feel like they are in the know or that they have found something that other people haven’t, then that really increases the value perception that they get from the price. When an exotic new product comes out, you might get your hands on it or you might not. What makes Trader Joe’s products seem even more special is they come and go. Trader Joe’s regularly introduces new products and then discontinues others since the stores are relatively small and shelf space is limited. So there’s also this issue of scarcity. If I like the item, buy it now. I’m not sure it’ll be here next month. There is an element of impulse shopping that’s going on right because of the treasure hunt. There’s a sense of discovery — of things that feel rare and urgent.Sometimes when I come home from Trader Joe’s, I find myself telling my husband everything I bought. And your favorite lava cake. It’s almost like I’m bragging to him, like, look what I found. And the process of making those discoveries is fun, too, because it’s not too overwhelming. Trader Joe’s stores are typically 10,000 to 15,000 square feet in size. The average grocery store is about 40,000 square feet, while supercenters like Walmart or Costco can exceed 200,000 square feet.Trader Joe’s stores carry about 4,000 SKUs or scannable units of inventory. The average grocery store carries about 30,000 SKUs, while supercenters can hold four times that. Researchers say too many choices can lead to paralysis. It’s easier to decide what you want when choosing from a smaller selection of items like at Trader Joe’s. What customers really want is they want the perception of choice, but they want the experience of no conflict, of less choice. They want an easy choosing experience. Sheena Iyengar conducted a well-known experiment that studied just that. In the study, Iyengar set up a jam sampling station at a grocery store. She found that more people purchased jam when there were less options to choose from. Customers also feel more confident they chose the best of what was here. So the entire experience makes them feel both more competent as well as more confident. What Trader Joe’s doesn’t want you to know is that you can find very similar or identical products at other grocery stores. The company sells more than 80 percent private-label goods, meaning they’re made by third party manufacturers and sold with Trader Joe’s branding. And Trader Joe’s is notoriously secretive, especially about who their suppliers are. That way you don’t know where their products really come from. They don’t want customers to feel that they have an alternative way to get the same thing. But in some cases, they actually could. Trader Joe’s sources some of its products from major manufacturers that make all kinds of familiar goods. And some of those goods under different brand names may actually be similar or identical to the private label version sold at Trader Joe’s. For example, a 2017 Eater investigation found that Naked Juice, a subsidiary of PepsiCo, has provided Trader Joe’s with bottled smoothies. And when you compare a couple of Trader Joe’s smoothies with their naked juice counterparts, the ingredients are nearly identical.But Trader Joe’s can also have exclusive supplier relationships. I know when I worked there, there was a frozen pizza from Italy and it was a little family in Italy somewhere that made the pizzas. And Trader Joe’s was their only customer. That is obviously not the case for most products. Now Trader Joe’s does prefer, if possible, to tweak the recipe so that technically they can say, ok look, this is completely unique to us.The media expected there to be some backlash towards this idea that Trader Joe’s was trying to pretend as if these products with their own. But I think that what consumers discovered is, you know what, I’m going to get the same product at a lower price and a better shopping environment at Trader Joe’s. After all, one of the grocery store’s biggest draws? The prices are amazing. Joe Coulombe established Trader Joe’s in the 60s with a certain customer in mind. Coulombe said he created Trader Joe’s to cater to the increasing numbers of people getting a college degree. It’s the person who has good taste perhaps, who likes to try new things but doesn’t necessarily want to spend a great deal of money.So how does Trader Joe’s keep prices down? By keeping its costs down. For one thing, Trader Joe’s sells mostly private-label goods which are cheaper than name brand goods like Haagen-Dazs ice cream or Starbucks coffee. Experts say Trader Joe’s is also able to negotiate better pricing from suppliers by purchasing goods in larger quantities. After all, Trader Joe’s offers a smaller selection of products than traditional grocery stores and thus sells larger quantities of each item. It’s also possible that Trader Joe’s has help from a corporate parent, Aldi. Aldi could leverage its relationships with suppliers to help Trader Joe’s get better pricing. Despite all these cost saving measures, experts say Trader Joe’s isn’t necessarily cheaper than other discount grocery stores. It just feels especially cheap. I’m not sure if it’s so much the reality of a big price difference as it is the perception that you’re getting a better value from Trader Joe’s. You’re getting higher quality ingredients, you’re getting a better edited selection, you’re getting a much more pleasant shopping experience.In other words, you’re getting more for your money than at similarly priced rivals. But the Trader Joe’s shopping experience isn’t just about feeling that the products are a great value. It’s about feeling that you are valued. At this particular location, there’s several people that know me by name. And you know, hey, how you doing? Why are Trader Joe’s worker so friendly and happy all the time? They’re always striking up conversation with you at the cash register or when walking you to a product you’re looking for. When Mark Gardiner worked at Trader Joe’s, he found that this employee behavior is not an accident. They barely showed me how to work the cash register. But they spent hours and hours acting out little play acting exercises of how you would interact with a customer. By observing his peers,Gardiner realized Trader Joe’s prefers to hire a certain kind of person. People who are naturally extroverted, naturally empathetic. And Trader Joe’s is willing to pay above industry standard for those employees. According to the Trader Joe’s podcast, crew members get raises twice a year. Perks can also include health insurance and retirement benefits. Gardiner enjoyed working at Trader Joe’s, but the job wasn’t without its headaches. Scheduling of staff was a complete disaster. It was the most completely crazily disorganized. So there are a lot of things that they’re not good at. Really basic grocery store stuff like restocking the store. Are they ordering the right mix of stuff? Are they ordering the stuff that people actually want? They’re not that good at that. Are they keeping cold things cold? Are they keeping frozen things frozen? They’re not that good at that. They’re not particularly good at being a grocery store. They’re really not. What they’re good at is this one thing. Building this incredible brand. But experts say Trader Joe’s isn’t trying to be the very best grocery store.Trader Joe’s is acknowledging that for most Americans, you can’t do all your shopping at Trader Joe’s. You’ve still got to go to another grocery store. I do think sometimes you need the basics and they don’t have it. Sometimes the produce may not be like as fresh as other places. The company’s meat and produce sections have drawn criticism in the past for being limited or not the best quality. They’ve realized, hey, we can’t be all things to all people. And we know that our customers will also shop the competition. But what will they shop us for? And can we be best in class for those products? Let’s be honest. Grocery shopping can be a chore. It’s an errand many are happy to outsource to Amazon or Instacart.Technology is trending toward eliminating the grocery store shopping experience altogether. Meanwhile, Trader Joe’s isn’t competing on convenience. It’s giving you a different kind of grocery shopping experience, one that motivates people to seriously inconvenience themselves in order to shop there. The company has successful regional competition from the likes of Wegmans on the East Coast and H-E-B in the South. But other national and multinational grocery brands have tried and failed to imitate the concept in the U.S. Roberto says Trader Joe’s is hard to copy because it doesn’t have just one competitive advantage. The goal for any company right isn’t just to build a distinctive strategy. It’s to build a moat around their castle, to be able to defend the castle. How do you do that? You build a unique system of activities, interlocking choices and activities. A system where things fit together really well. That’s how Trader Joe’s has carved out its own niche in a very cutthroat industry. You can go anywhere to tick off a checklist of basic needs. But at Trader Joe’s, it’s about the joy of discovering something unexpected, even if it means not checking off a few things on your list.