Frozen & Dairy Buyer: Trader Joe’s – Cherry Pickers of ‘Quality’
Through
a special arrangement, presented here for discussion is a summary of a
current article from Frozen & Dairy Buyer magazine.
Which do
you think Trader Joe’s shoppers would say they like the most, if they had
to choose from among price, selection, quality of products or the total
shopping experience? Not that the other options receive bad grades but “quality” turns
out to be number one.
I recently asked
Phil Lempert, editor of SupermarketGuru.com,
to send me some data about Trader Joe’s shoppers. Specifically, I wanted
to ask Trader Joe’s shoppers what percent of their shopping they do there,
how often they visit, how they feel about the lack of national brands and
if they thought price, selection and quality were up to snuff.
So last
month, 1,293 members of Mr. Lempert’s consumer panel checked in, with 67
percent of them women and 91 percent of them Trader Joe’s shoppers.
Of
the Trader Joe’s shoppers, 82 percent rated product quality as “terrific,” with
another 16 percent checking off “okay.” Only 2 percent — sourpusses no
doubt — rated quality as “terrible.” Next on our list: “total shopping
experience.” Here, 78 percent said “terrific,” 20 percent said “okay,” and
those same malcontents 2 percent said “terrible.” Price came in third,
with 59 percent saying prices were “terrific,” and 40 percent saying “okay.”
“Selection” was
in last place. With 49 percent saying “terrific” and another 49 percent
saying “okay,” that’s hardly bad. But the differences between the relative
answers are interesting.
“The majority
of shoppers are using Trader Joe’s for fill-in and special purchases,” Mr.
Lempert said in an e-mail. “It’s more like a treasure hunt than a day-to-day
shop. Also, the fact that half felt the selection was okay further reinforces
this.”
Mr. Lempert’s
research showed that 92.6 percent of the Trader Joe’s shoppers said “the
lack of national brands does not bother me.” But only 2 percent said they
do between 75 percent and 100 percent of their shopping there. Okay, so
maybe it doesn’t bother them, but they do visit other stores. Only 12 percent
said they do between 51 and 75 percent of their shopping at Trader Joe’s.
This means that 86 percent of Trader Joe’s shoppers do half or less of
their shopping there. But a third visit once a week or more, with another
25 percent visiting every other week.
Mr. Lempert sees
a “huge opportunity for them (Trader Joe’s) to expand to get an additional
shop frequency out of each category of shopper. They probably need to add
just a few leading SKUs that are currently not available” in the stores,
he says. For Trader Joe’s, getting more share of market would seem possible,
since shoppers seem to be cherry-picking the stores not so much for price
but for unique “quality” items. Based on the survey results, maybe some
tweaks to promote lower price perception would also help, whether the chain
actually cuts prices or not.
Discussion
Questions: What can Trader Joe’s do to increase the overall grocery
spend from its loyal customers? What categories could be added or enhanced?
What pricing changes might be required?
I think the question reflects a lack of understanding about Trader Joe’s. I don’t believe the store is meant to fulfill all my needs and there’s nothing they are likely to do to reach that goal that would be effective or even interesting. Indeed–they would probably damage their current reputation. Look at the data presented–it’s a specialty store, not an everyday grocery. You have the same issues with a fish market or a butcher shop–they are meant to be what they are, not a one-stop shop for all things grocery.
Trader Joe’s has a good formula right now. It has a devoted clientele who want something different that they can perceive as being special without paying too much for it. If TJ’s were to expand its tight quarters, its mix, and add national brands, it would just take them closer to the supermarket image. That would annoy its loyal clientele. So–stay with your current program, Trader Joe’s.
We’re one of those families that shops Trader Joe’s weekly. This habit began during the Southern California grocery strike. What we don’t buy at TJ’s is usually purchased at Costco and sometimes at Ralph’s. We’ve adapted to TJ’s store brands, rather than national brands and rarely miss the national brands. I think it would be a mistake for TJ’s to bring in leading brands. It would increase costs–a key factor in their favor–and take away some of the fun of the in-store experience.
TJ’s should look at what categories are missing or could be improved and then pursue them. They could also look at adding more local, fresh items.
Our local stores are pretty crowded, particularly at peak shopping times. Increasing frequency of visit might cause near grid lock, so be careful what you wish for.
While Trader Joe’s does provide an exceptional customer experience and their staff is probably the best trained in the business, they do have a limited selection and not enough tiered price points.
If they are looking to expand their customer base, they are going to have to offer different levels of pricing on core items. A good strategy may be to introduce a lower-tier private-label offering to compete with lower-priced alternatives at major groceries. Another tactic is using ‘entertaining experts’ during key traffic times to build the basket (Warren knows what I’m talking about).
TJ’s is a class act but I don’t believe it’s the shoppers’ only and final destination for groceries. There are just some things you can’t get there!
I agree with Stephen and Gene, above. Trader Joe’s is a specialty store and not meant to be the regular supermarket. Trader Joe’s has the highest sales per square foot performance of any grocer I know of. I’m not going to suggest changes or second guess anything they are doing. If it’s not broke, don’t fix it.
It would have been interesting to have been able to compare the total percent spend amongst each of the groups reporting their shopping frequency.
Regardless, the statistical data collected clearly shows that TJ, for at least 66% of those responding, represents 25% or less of their spend; clearly not their primary source of grocery spend.
TJ has a great formula and a loyal following for at least a percent of their spend. Don’t mess with success.
The only issue I have with Trader Joe’s is that the products I buy there disappear almost immediately after I bring them home. The only enhancement I’d suggest for TJ’s is more stores!
I’ve always felt that a visit to TJ’s is a good shopping experience. That’s what consumers want. On a strictly selfish basis, I just wish they had a store closer to my residence. Oh well, I guess I could always move.
I think that Trader Joe’s product gaps leave them vulnerable. Whenever I’m in California and think about shopping at TJ’s, I evaluate whether the trip will get everything checked off my list and if not, whether another store could. That quick analysis often sends me to Ralph’s. The grocery stores in Trader Joe’s markets are some of the most sophisticated in the U.S. TJ’s should survey its customers about “missing” items and start filling holes.
The only complaint I have about Trader Joe’s is that there are no stores in South Florida! It is probably the one single thing I miss about living in New England.
I’ve asked, and I know the reason there are no stores here is because the DC furthest south is in Atlanta and we are too far away to service from there.
So riddle me this…if a DC were to be built–oh, let’s say outside of Orlando, wouldn’t there be a big enough market in Miami, Ft. Lauderdale, Stewart, Naples, Jupiter, Palm Beach, Orlando, Gainesville and…well…you get my point. I have friends who used to smuggle TJ’s condiments home in their suitcases. Me, I crave those frozen products.
We await you…come on down!
Trader Joe’s is not meant to be a Safeway and shouldn’t ever want to be one. I go to Trader Joe’s at least once a week for specific things like TJ French Roast coffee for $4.99 (vs. $9.00 for Starbucks), TJ Extra Virgin Olive Oil for $5.99 (vs. $14.00 at Genuardi’s), and TJ whole multi-grain tortilla chips. Then there are the frozen TJ meals and ready-to-eat refrigerated foods that taste great and are healthier, high fructose corn syrup free and not processed with chemicals. Things you can’t even find in supermarkets, like TJ frozen roasted corn, and fresh gazpacho make the trip worth it. The frozen strawberry shortcake is made with real strawberries and real whipped cream, not gel puree.
Every time I go to TJ’s, I discover something new. It really IS like a treasure hunt. The quality is excellent, the service great and you can return anything you don’t like for a full refund–even if you’ve eaten it. The one category I would consider adding to TJ’s is non-food items like little gifts and artisan type things.
Trader Joe’s can focus on quality and interesting new fill-in ideas. Doing this more effectively will increase sales and shopper satisfaction. They cannot be nor should they try to be “everything for everybody.”
TJ’s is a wallet-share play, plain and simple. It skims a profitable portion of its customers’ household spending and trips by staying attractive and fun to shop. The moment Trader Joe’s tries to be all things to all trips, its mojo will implode.
Could a few assortment tweaks help improve its sales? Probably. But based on my observations, it makes those sensible merchandising adjustments all the time. Let the over-assorted supermarkets beat each others’ brains in over capturing the dreary, margin-pressured stock-up shopping trips. TJ’s captures the trips where shoppers have no expectation of finding all their needs, just the fun stuff.
The choices on the RetailWire survey of us are incomplete. I would just like them to have more stores so I had one closer than 90 minutes away. I shop TJ every time I’m near one. Speaking of cherry-picking, it seems like everyone has their own favorite items. I’ve visited TJ on bus tours with clients and everyone brings back their favorites to share and brag about. If they allowed passionate customers to share their favorites somehow, that would build transaction size and frequency.
I agree with James above. It’s a fun place to shop and I do believe they should keep their uniqueness. Too many new offerings would ruin what they’ve developed, but a few tweaks would definitely help.
As a working mom, I would love to have the time to shop at both Trader Joe’s and also get my other necessities from Giant Eagle. But I have to balance the fact that I would have to go to two stores and there just isn’t enough time for that. If TJ just added a few more items, I could justify my trips to their stores a little more often.
More to the growing chorus, and a caveat to TJ’s executives: do not, under any circumstances, apply off-the-shelf retail consulting approaches to “improving” your business. Canned offerings like assortment rationalization, SKU maximization, price point laddering are NOT appropriate for the retail model TJ’s has built.
I am in complete agreement with the balance of other BrainTrust and non-BrainTrust panelists. Not only isn’t it broken, it’s brilliant. Were I to suggest any one thing to TJ’s it would be to work on business processes which act to reinforce, monitor and support the complete cultural approach currently taken. Every new product line, process, piece of technology or staffing approach should be evaluated from within the paradigm of “does this support and enhance our culture, and will it support and enhance the public facing evidence of that culture?”
So…there may be products or even entire categories of merchandise which meet those constraints. And there may be (probably are) products and perhaps entire categories currently carried that crept into the mix without that level of scrutiny. So yes, there are probably areas for development. But NOT from within any of the normal retail process, best-practices models. Particularly those evolved for grocery!
The only thing TJ’s could do is expand into more markets. But change what they have? No. It’s 150 miles for me to visit something that great in our industry. It would be great to have one in my marketplace, however, I wonder even if that destroys some of their uniqueness. Ubiquity isn’t all it’s cracked up to be.
Trader Joe’s provides a total shopping experience that is truly unique. Yes, its selection is somewhat limited, but people know that over time. Their staff are incredibly knowledgeable and helpful to customers on questions about product availability or concerns. Their stores are also easier to shop in a short amount of time compared to many other food stores and super centers. That’s a big plus for many consumers these days along with clear price and savings signs.
You can always try a sample of something new (often a recipe for dinner) and their coffee sampling and variety of coffees is amazing. And most of their staffers seem to really enjoy working there and can tell you about the products they like as they bag your groceries. Other stores spend countless hours to emulate that but don’t achieve Trader Joe’s success.
If Trader Joe’s wants to increase sales, the goal should be to get more customers, not more sales from current customers. As many have mentioned, more stores would do that. In addition, a marketing program catered to prospecting for new customers would help.
But heavens no, don’t change the internal formula in the box.
Having been one of those ‘cherry pickers of quality’ for many years myself, I have always felt that TJ’s has missed an obvious opportunity–and it IS NOT adding national brand products. Are you kidding?
Adding national brand products would be a huge mistake. Why offer a commodity you could purchase at any other retailer and therefore be at risk for ‘price comparison’?
I believe TJ’s biggest opportunity missed is limited/no product offerings in fresh departments such as meat and produce. It sure would be nice while picking up those truly unique, delicious, and usually better-for-you products, I or my wife could also pick up some core meat and/or produce ingredients. Not only would this be beneficial to its loyal customers, it would fit nicely with TJ’s core merchandising/marketing strategy (e.g. stocking only 100% organic fresh products) and perhaps save an occasional trip for myself and my wife from our “cherry picking” trips to Whole Foods for their best of class fresh/prepared food offerings.
Trader Joe’s is a limited SKU company. They strive to be your “first and favorite” and operate under the tenants that you will have to shop at other stores to complete your list. They just want you to visit them first.
Being a privately owned company, Trader Joe’s does not have to bend to the pressures of stockholder influence. They are able to expand at a rate that is reasonable, and sustainable. They want to be everywhere, but at what cost? The customer service that sets them above other grocery retailers is built into the culture, and is not something that can be taught to new staffs in a week’s time. To meet the standards that they have set for themselves, slower growth is not only essential, it is imperative for their continued success.
And are they a specialty grocery store? In some ways, yes. They offer customer service akin to neighborhood family-run stores, and that is indeed special. However, eggs, milk, fresh produce (conventional and organic), bread, and canned goods are hardly out of the ordinary for a grocery store to carry. They just do it better than most.