PL Buyer: Joe’s Trading Its Way to the Top

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Aug 23, 2010
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By John N. Frank

Through a special arrangement, what follows is a summary of
part of a current article from Private Label Buyer, presented here for
discussion.

While it’s doubtful most retailers would want to copy Trader
Joe’s
Hawaiian-shirt-wearing employee dress code or start putting grass huts in their
aisles, they can learn some important lessons on how to make their private label
lines as appealing to consumers.

Today, Trader Joe’s stocks a limited assortment — about
2,025 SKUs — and
roughly 85 to 90 percent of those are private label offerings, says Len Lewis,
author of The Trader Joe’s Adventure, published in 2005. Average
annual sales per square foot for all its stores are $1,372, double the industry
averages, estimates Planet Retail, the London-based retail research
firm.

Trader Joe’s delivers quality in its private label products at prices
below those of national brands. At the same time, it sprinkles in uniquely
sourced outside brands and products to cultivate the sense that shoppers are
in for a shopping adventure every time they step into the store. When it finds
branded products that click with consumers, the retailer often will create
a private label version with differentiating characteristics to help it stand
out on shelves.

But the overarching message for other private label retailers
in the Trader Joe’s
formula is the importance of maintaining a consistent image — from the look
and feel of stores, to packaging and product sampling, to its offbeat marketing
through the Fearless Flyer newsletter.

“They have a brand promise … and they have a brand personality
that is consistently brought to their marketing campaigns,” said Jim
Hertel, managing partner with Willard Bishop.

Its success also shows that stores
shouldn’t be afraid to create private label brands that have some quirkiness
of their own, noted Kirsten Osolind, CEO and founder of RE:INVENTION Marketing.

Constant
product innovation is another Trader Joe’s hallmark others
can emulate. The retailer’s website notes that 10 new products are rolled
out each week. Introducing new private label offerings and even limited time
ones create the sense of discovery common at Trader Joe’s and others
such as Costco, which employ rotating limited-time specials. Be the first in
a new category rather than a follower of national brands, advises Blair McCaw,
president of Constellation Management Group.

“For so long, retailer private label strategy was really about just
mimicking the national brands. It’s only been the last three to five
years that retailers have started to develop brand management functions in
their companies and think about building or licensing brands to differentiate
themselves. Trader Joe’s
was out in front of that for a long time,” Mr. McCaw says.

Another lesson
is to do whatever you can to make the shopping experience a fun one for consumers.
That doesn’t mean just making kitschy outfits
standard uniform, says Ms. Osolind, who was Whole Foods’ national marketing
director in the late 1990s and early 2000s. Rather, it can relate to store
flow and consumer education efforts in-store.

“In a hypercompetitive world, differentiation is really the holy grail
of retailers,” Ms. Osolind says.

Discussion Question: What lessons does Trader Joe’s success offer those
looking to develop their own private label programs?

Please practice The RetailWire Golden Rule when submitting your comments.

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21 Comments on "PL Buyer: Joe’s Trading Its Way to the Top"


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Mark Price
Guest
Mark Price
10 years 8 months ago
Anyone who has shopped at Trader Joe’s recognizes the unique shopping experience. Not only is the customer service first rate, consistently, but the product assortment and variety makes the experience into an adventure as well. Compare and contrast the product assortment to private label in a traditional grocery store in the US, and you find the exact opposite–the traditional grocery store stocks private label as a low-priced knock-off of an established brand, while TJ’s has unique innovative products at a premium price. This is in contrast to private label in the UK, where the store version is usually more premium and distinctive than the branded version. What can mainstream grocery retailers learn from TJ’s product strategy?* Private label is not required to be low-priced to be successful* Stores with higher end private label become the brand, rather than relying on the same products as every other store* Development of premium private label requires commitment and investment — you cannot just rely on the manufacturers to produce the same product they sell branded, just under another… Read more »
Dr. Stephen Needel
Guest
10 years 8 months ago

Full disclosure–I think Trader Joe’s is the greatest thing since sliced bread (which they don’t sell–but their bread is fantastic) and am a frequent shopper there. Price is much less the issue for me – it’s actually a bonus. It’s the quality of their products that keeps me coming back. And more important–their products are not “just as good” as national brands–in many cases they are better than nationally branded foods or there is no branded product just like it.

Good products, good prices, great shopping experience–any major retailer should envy them and are unlikely to be able to create the same thing.

Max Goldberg
Guest
10 years 8 months ago

The article says it all. Rather than simply try to copy national brands, private label needs to have personality. It’s OK to be different. Then retailers need to back up that brand promise with great customer service. Good private label products are half the equation. A great in-store experience completes the equation.

Carol Spieckerman
Guest
10 years 8 months ago

One big lesson that can be learned from Trader Joe’s private brands is that you don’t have to start with the basics. The traditional approach to private brand, particularly in food, has been to cover the basic bases first then move on to the gourmet and offbeat items (or leave those to the national or niche brands altogether).

If anything, Trader Joe’s has done the opposite and in fact, a visit to Trader Joe’s can leave one a bit frustrated when everything doesn’t get crossed off the list (but look at these delicious enchiladas and the beautiful sushi!) Also, as pointed out in the article, Trader Joe’s has managed to remain invested in its brand while not getting overly invested in individual items. In fact, rotating and evolving the assortments has been key to driving TJ’s brands’ relevance.

Gene Hoffman
Guest
Gene Hoffman
10 years 8 months ago

Trader Joe’s caters to those people who don’t want to hop on traditional bandwagons; who enjoy being different; who seek foods of unusual tastes and other cultures; who believe that TJ’s private label packages have a distinct personality and are better choices at better prices. TJ’s has become an iconic niche master.

But if TJ’s were to enlarge their concept into 50,000+ sq. ft. stores, what would they have? Possibly a large and quirky private label supermarket.

So TJ to say, keep marketing what you have developed so successfully in small, desirable doses and stores. The larger world may not be ready, at least not yet, for a broad horizon dominated by a Trader Joe’s sunrise.

Ben Ball
Guest
10 years 8 months ago

Pardon me if I sound like a bit of a grouch on this fine Monday morning–but how many times are we going to go over this same ground?

The difference is simply that the owner, developer and promoter of the brands is a retailer and not a manufacturer or other third party marketer. If there is any one definitive advantage a retailer has in building brands, it is the one cited by Jim Hertel–they can effectively maintain a consistent personality across multiple brands because they control the presentation to the consumer in-store.

Susan Rider
Guest
Susan Rider
10 years 8 months ago

First quality and then shopper experience! Trader Joe’s, like Costco, has gotten a reputation for quality, therefore, there is a perceived value added.

Dick Seesel
Guest
10 years 8 months ago

I see three things that differentiate TJ’s from the competition:

1. Distinctive product development instead of “me-too” merchandise;
2. A consistent focus on value;
3. A disciplined approach to assortment planning.

The relatively small size of most Trader Joe’s stores forces the chain to make sure that every product carries its weight. And the customer is consistently–and pleasantly–surprised by the price/quality equation. These are clear lessons not only for food retailers but for every retailer trying to build a more rational and competitive private-brand model.

John Boccuzzi, Jr.
Guest
John Boccuzzi, Jr.
10 years 8 months ago
Trader Joe’s has several lessons that we can all learn from. 1)Treasure Hunt – Similar to Costco’s center of the store, Trader Joe’s is a treasure hunt with constant new products in both national and private Label being brought in every month. 2)Unique and high quality private label items – Trader Joe’s works hard to find items that don’t always imitate successful national brands, but are unique. Their variety of nut and dried fruit mixes is just one example 3)Customer care – Trader Joe’s focus on customer service is tough to compete with. They have found a way to motivate employees by creating a fun and interesting work environment that pays above average wages. I have been saying hello to the same Trader Joe’s employees for almost 10 years. That says a great deal about their pay structure and work environment. 4)Fast checkout – Trader Joe’s is constantly opening and closing registers to keep traffic moving quickly through the store. Nobody likes to wait in line or do self checkout with 20 or more items.… Read more »
Liz Crawford
Guest
10 years 8 months ago

Trader Joe’s private label works because it is an extension–a souvenir–of its brand culture. Shoppers seek the promises of the Trader Joe’s brand: fun, authenticity, adventure, wholesomeness, and value. (NOTE: My interpretation of their brand benefits, not official corporate material).

These benefits are exactly what shoppers get when they make a TJ private label purchase–they get to bring home some of that fun, wholesome adventure. It’s a treat when you open the bag in the kitchen.

Target (in the day) also extended its brand benefits into private label, with considerable success. I think it is returning to this.

So, the moral of the story is–develop a unique, compelling brand and merchandise the heck out of it.

Bill Emerson
Guest
Bill Emerson
10 years 8 months ago

The key statistic here is that Trader Joe’s assortment is 80-90% owned brands. This turns the PL model upside down. TJ more closely resembles a vertical apparel retailer than a standard grocer. This gives them complete brand and price control along with a unique offering in the marketplace.

Chuck Palmer
Guest
10 years 8 months ago

Trader Joe’s is an example of classic specialty retail. I believe it to be more of a fashion shopping experience than grocery.

Everything important to consumers-product, price, place, and people (staff)–are anchored by an obvious love and respect for their customers.

The whole experience is compelling, which motivates people to go out of their way to shop there. It’s not the only food store on our lists.

In a brand-everyplace world, private label driven stores can be wins for consumer and retailer alike, especially when they are hitting on all pistons like Trader Joe’s.

John Frank
Guest
John Frank
10 years 8 months ago

Thanks everyone for your great comments, I saw this morning that Fortune also had a piece on Trader Joe’s. Any suggestions for which retailer we at Private Label Buyer should profile next?

Lee Peterson
Guest
10 years 8 months ago

What makes TJ’s great is their ability to stay focused on the brand. They never stray. Although that’s a simple statement, how many brands can actually say that? Two; three?

Having said that, the one thing I don’t like about the Trader Joe’s experience is the stores themselves. Yes, the merchandise and signage is the hero and the tacky decor elements work, sort of, but the fundamentals–lighting, flooring, fixtures–could be improved with not much effort and very little cost. I “get” that in order to save costs, they’ve denied us those elements, but there are materials out there that are as cost effective as what they’re using and much more confluent with the rest of the brand. It’d make much more sense for TJ’s long term to go ahead and take the last step and finish off an otherwise great experience!

Craig Sundstrom
Guest
10 years 8 months ago

If Ben could make some room for me on the grouch couch…I too certainly can’t fault TJ for their success; but at the same time, it seems that this is a classic case of a niche player: i.e. (much of) their success is due to the fact that they do things that others don’t; so, implicitly, it would do no good for others to try to emulate them, since the uniqueness would be lost. There is perhaps more to learn with the issues of consistent image and private labels; but the former is hardly a novel concept, and would we want every retailer to offer only their own labels? probably not.

George Whalin
Guest
George Whalin
10 years 8 months ago

Yes, Trader Joe’s provides customers with a quirky and unique shopping experience but, Trader Joe’s competitive strength is “value.” This successful food retailer has been able to offer a wide range of foods to an even wider range of shoppers at values that are unbeatable. While other food retailers are shouting about how they have cut prices on thousands of items, Trader Joe’s continues to offer quality merchandise at prices that are appealing to shoppers at every income level. There’s is a formula that works in good times and bad.

Ed Rosenbaum
Guest
10 years 8 months ago

Trader Joe’s brings a degree of excitement to the shopping experience. Not many family grocery shoppers, usually the wife, can say they enjoy grocery shopping. It is something they have to do. While they don’t necessarily have to shop at Trader Joe’s; the experience makes it enjoyable and welcomed.

All grocery chains have a brand to them. Most are not anything close to Trader Joe’s. People still talk about “2 Buck Chuck.” Do you know of another chain that has something close?

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
10 years 8 months ago
“Trader Joe’s delivers quality in its private label products at prices below those of national brands. At the same time, it sprinkles in uniquely sourced outside brands and products to cultivate the sense that shoppers are in for a shopping adventure every time they step into the store.” How wonderful for them. But I’m sure that much larger retailers like Safeway, Kroger, Whole Foods, and many others are seething at the implication that this description refers only to Trader Joe’s. It’s one thing to pull this off on a small scale and quite another to do it on a much larger scale. And yet, several chains do it every single day. In the larger chains, with much greater selection, their excellent and well-honed private labels are just part of the fabric of the entire store. Not quirky for quirky’s sake. Trader Joe’s is a food boutique, total quirky, and that’s very cute and cuddly. That’s their business model, which they know they could never deliver on a large scale. But in a nutshell, I’d put… Read more »
Jerry Gelsomino
Guest
10 years 8 months ago

We just returned to the US for a two week trip. We landed in Indianapolis and one of my family’s first stop was to TJ’s. I lamented all the things in the store that we couldn’t buy to bring back to Hong Kong. We used to live a two-block walk away from TJ’s Santa Monica, CA.

The real magic is the employees. Whether it is LA, Chicago or Indy, where do they find these fun, bright and cheerful people? Private label success? Well, the employees try the products and genuinely talk about the good stuff. “Come back and tell me how you like this?” is a common enticement. Ever heard that at any other major supermarket?

Justin Time
Guest
10 years 8 months ago

TJ creates fun with its many private label offerings. They offer a very cool experience to their customers.

The only other food merchant that I can think of, that also has fun with its private label offerings, is Great A&P and it’s Via Roma authentic Italian food offerings. Images of beautifully captured Tuscany native folk enjoying the zest for life, grace each product box and packaging. It’s like being in Italy, without having to spend the airfare.

Sue Dowd
Guest
Sue Dowd
10 years 8 months ago

@John Frank – would be interested to see you profile Staples, if you haven’t already done so….

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