Is Trader Joe’s Suffering From an Identity Crisis?
A Reuters report suggests that retailers today are in search of the magic format. Retailers known for big stores, such as Walmart, are building much smaller units. Others that grew to prominence with small formats — such as Forever 21, with its original 900 square-foot stores — later took on 10,000 to 20,000 square foot spaces and are now opening units that reach 85,000 square feet.
Another successful chain that made its reputation with small stores, Trader Joe’s, is opening bigger stores to accommodate the many fans that flock to its locations wherever they open. While the size change is not nearly as dramatic as Forever 21, Trader Joe’s is opening 14,000 square-foot units in place of those about half the size.
A bigger concern for Trader Joe’s is whether it can hold onto the "quirky vibe," as the Los Angeles Times calls it, that made the chain great.
"Their mission is to be a nationwide chain of neighborhood specialty grocery stores," Mark Mallinger, a business professor at Pepperdine University, told the LA Times. "But there’s a dichotomy there. It’s like being a national chain of mom-and-pop stores."
Discussion Questions
Discussion Question: Will Trader Joe’s be able to hold onto what has made it successful as it opens larger stores?
It’s one thing to go national, it’s another thing entirely to open large-prototype stores on a big scale. There is a huge difference between 25k and 85k square feet! Joe’s formula goes beyond quirky signature products like Two Buck Chuck or its unique array of private-brand ethnic foods. A big part of its success is built on tightly edited assortments, made to fit its small-footprint stores. Why walk away from the operating and assortment simplicity that draws loyalty in the first place?
No need to overreact to the Trader Joe’s announcement. The new stores will only be 14,000 square feet, not Target or Walmart-like (100,000+ square feet). The larger stores come with additional parking and allow the company to better serve the needs of their customers. In addition, it provides Trader Joe’s with platform to enhance its offerings as it directly competes with the likes of Whole Foods.
At Trader Joe’s it’s more about the culture than the size of their stores. Quirky is just one of the things that endears Trader Joe’s customers to their stores. A 14,000 square foot store is not what anyone would consider a superstore. This is much-a-do-about-nothing!
Trader Joe’s has always been a combination of format and food. The format is changing in size (not necessarily in interior ambiance/food presentation) but the food is not. I believe the transition to the larger formats will enable Trader Joe’s to gain customers who will find shopping in a less crowed store a more pleasant experience.
I know my family will not shop in our local TJ’s on the weekend simply because it is so crowded. Bottom line, the food is more important than the small format.
Big or small, I have only one question: When the heck is Trader Joe’s coming to South Florida? It’s almost the only thing I miss about New England.
Trader Joe’s merchandising and staff help create the special image loyal customers cherish. If they are able to maintain the home spun servicing, along with great products and good pricing, I think they will be fine with larger stores. At some point shoppers begin to notice crowding and long lines at checkouts. Preventing that negative impact of that component of success might just further Trader Joe’s place in the hearts and pocket books of its fans.
I don’t think this will be anything to concern ourselves over. Sure there will be issues as the chain develops and matures. New people will be brought in to the C suite bringing their ideas from other locations which eventually create some changes. But as long as the C-level execs remember what got them to where they are and who Trader Joe’s is; no big changes should disrupt the culture.
I think it will help them be even more successful as long as they don’t increase the number of SKUs in a category. Besides the great people and unique shopping experience, one of the things that differentiates TJ’s is the narrow selection of SKUs.
This is like Berra’s “it’s so crowded people don’t go there any more.” Often we don’t recognize that the problem is the answer. It’s ‘supposed’ to be crowded at Trader Joe’s! You’re ‘supposed’ to meet the same teller and talk to the same wine guy every time you go. Why on earth would a company kill its own golden goose?
As a speaker I love standing room only. If you’re trying to stir up energy in your meeting, deliberately book a room just slightly too small for the crowd. The last thing you want is a meeting room bigger than what you need.
Bentley should not build an affordable car. Costco should not build tiny neighborhood stores. Lysol should not be a brand for cosmetics. And Trader Joe’s should not be a big box store! It would be a much better plan to have more of them. Sure wish I had one closer!
In short the prof at Pepperdine is right — it’s a national chain of mom-and-pop stores. Only that’s not a dichotomy, it’s a “bichotomy.”
Bigger is not always better. The difficulty will be finding that balance between keeping that “quirky vibe” that is a crucial brand element and the financial pressure to increase the revenue per square foot that drives shareholder value. A key factor in the appeal of Trader Joe’s is that a shopper can move through the entire store in a timely manner and discover new items that find their way into your basket. As the store gets larger there is a risk that they will lose that small community appeal. Larger stores simply won’t fit into small community areas. They’ll be relegated to geographic locations inhabited by other ‘big box’ retailers thus potentially losing their brand identity.
The management at Trader Joe’s can review several retail industry successes and failures as it moves to change store formats. On the success side, there is Walmart Supercenters, SuperTargets and Food Lion’s Bloom stores (for the most part). On the not so successful side, there is just about everything Kmart and A&P have tried over the years.
The critical difference in each successful case is that the retailer kept to its core merchandising philosophy and added management with specific experience in the added categories. The unsuccessful cases had merchandisers who were doing well in one category overseeing areas they did not understand.
A couple of more thousand square feet will just allow for more quirkiness.
The only thing customers seem to complain about at TJ’s is how full the car park is and the stores being too busy, and the checkout queue too long. Adding some space should help address this.
It’s also good to see them making some effort to evolve. I was starting to wonder if the format and ’60s surf vibe is a bit outdated, especially with Fresh & Easy sprucing up its act and stores (to see what I mean, check out the F&E at Manhattan beach, then go straight to TJ’s next door…).
Trader Joe’s is about attitude and great products at good prices. Living in LA, and having been in a number of the small TJ stores during peak hours, I will welcome the larger formats. And they will finally have more parking. I doubt the larger stores will change the vibe.
As long as they can still deliver the ‘Trader Joe’s experience’ in a larger format, they should be able to hold on to existing and acquire new customers. History shows that as chains get bigger, they tend to lose contact with their customer. Trader’s built their business on the experience so as long as there is a plan to maintain that relationship, they should do well with more merchandise and additional in store services.
Trader Joe’s is one of the few food chains that has managed to establish and nurture a distinct positioning. Another of that handful is their virtual stable mate — Aldi. This comes from one clear driving force, management discipline. I don’t see TJ’s losing that by adding a few thousand squares to the floor tiles.
God knows I don’t have much faith in much — but I do believe in Trader Joe’s. So … if they want to add a few feet, I personally can’t wait to see what they do with them.
I stumbled on the LA Times article yesterday, and thought “much ado about nothing.” After reading this discussion, I looked up some numbers, and discovered (assuming the numbers are accurate and my division is correct) that the average TJ’s store is 13,454 square feet. That sounds a little high (wrong), but I still think it’s not a major change to move from a very old, tiny space into one that (let’s face it) isn’t really very big. When they decide to open up “Super Trader Joe’s” stores, then it would be time to worry that they’d lost their minds. This is a non-story based on comments from shoppers who can’t really visualize what 15,000 square feet looks like.
This has to be a good move — the only complaint most shoppers may have is how tight the aisles can be and limited parking. Stores can be crowded mid-weekdays, and weekends means congestion. Have faith that they will execute well.
There is still some room to get better, but in the end, all concepts age and change. Name a quirky chain from the ’50s that still holds the same niche today.
Trader Joe’s is so smart, so focused, that it won’t undertake a new project that it cannot deliver on. The Trader Joe’s customer trusts that every product in the store is worthy of trying, and the checkout experience will be delightful. Salud!