Trader Joe’s and Creating the Ultimate Branding Model

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Jul 07, 2005
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By Bill Bittner, President, BWH Consulting

Ok, this is not going to be a technology article. I have always thought of myself as a businessperson with a technology habit. I have never been totally enamored with the latest technology, preferring to understand the business results to be achieved. The speed of the latest CPU or the cleverest wireless device have never been that important to me. For that reason, this article is a little embarrassing.

The business has been abuzz over Trader Joe’s for some time, but it is only by chance that I had the opportunity to visit one as I was driving through Westwood, NJ the other day.

First, let me take this opportunity to publicly apologize to the driver behind me when I slammed on the brakes. Having made the turnoff dent free, I proceeded to spend forty-five minutes walking around the store. I really enjoyed it. I talked to a few customers and would have bought something if the lines hadn’t been so long. That didn’t seem, however, to bother the customers. I was even impressed with the men’s room, although that is merely a compliment to the outside service that maintained it.

What I found most interesting was the lack of national brands (nothing new to many here, I know), which caused me to start thinking about what that meant. Here is a retailer that has managed to build the image of their own brand to a level of acceptance that not only means people buy the brand, but are willing to make an extra shopping trip just to get it. All the customers I spoke to admitted this was not their only weekly shopping trip. They were going to have to make another stop for some of their needs. Yet the superior quality and uniqueness of the Trader Joe’s products made it worth the hassle for these people to shop there.

Moderator’s Comment: In today’s time pressed environment why are consumers willing to make an extra shopping trip to a store such as Trader Joe’s? What
is it that makes Trader Joe’s such a success?

I think the lesson I learned from the Trader Joe’s phenomenon is there is a dichotomy of shoppers out there. Yes, there are the time pressed and price conscious
shoppers who wish only to get as much for their dollar as possible in as short a time as possible. On the other hand, there are shoppers willing to take a chance on an “unbranded”
product and even go out of their way to do it.

This reflects back to some of our earlier discussions about branding and banners. Although not promoted nationally, the consumer knows what to expect of
the products in a Trader Joe’s. The extensive store brands enable the consumer to try a new experience with confidence while allowing the retailer to negotiate costs. The private
label costs are determined by the business relationship. This might be considered the “ultimate branding exercise” because the product and retail brand have become synonymous.

I guess another version of this business model is the Save-A-Lot stores for the “extreme price” consumer. Although they are not targeting the same consumer,
they also feature much of their own private label and the limited assortment requires another shopping visit. Again, with over $4 billion in sales, it seems some price conscious
consumers are willing to deal with the inconvenience.

Bill Bittner – Moderator

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17 Comments on "Trader Joe’s and Creating the Ultimate Branding Model"


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Al McClain
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Al McClain
15 years 7 months ago

Trader Joe’s is all about quality, the promise of quality, and the marketing of quality. Their marketing has a homey touch with their quirky flier, handmade signs, and especially word of mouth. Their private label products are simply better than much of what you get elsewhere, and often cheaper to boot. Two examples: their acidopholus (helps the digestion for those of you too young to know) needs to be stored only at room temperature rather than refrigerated like almost all other brands. Their frozen blueberries are high quality, sans sugar, and contain about 98% high quality berries, versus many other brands that don’t sort their berries nearly as well.

Trader Joe’s seems to just “do the right thing” and consumers know that. My only worry for them is that they may outgrow this mentality as they get bigger and ultimately go national, and strive to make their numbers.

Brian Numainville
Guest
15 years 7 months ago

Much of the appeal of Trader Joe’s is due to the shopping experience…finding the unusual, the unique…combined with the emphasis on health and wellness that is becoming more and more important, especially to certain generational groups like the Boomers. And yes, the product quality is generally very good, also a major plus.

Bill Cossaboom
Guest
Bill Cossaboom
15 years 7 months ago

I moved to San Diego 10 years ago from New Hampshire and over time became a faithful customer of Trader Joes, a fair substitute for the Hanover Food Coop. When I moved to Orange County (south of LA) last year I even sought out the TJ locations for living options. That’s loyalty, I’d say.

One point not really discussed, in addition to better or cheaper options, is the trend towards healthier foods. Whole Foods is the more national example, Trader Joe’s being one of the pioneers on a chain level. The TJ label often offers a healthier version than a national brand – organics, no hormones, low sugars, healthy oils, no sodium, sulfates, etc. I think there’s a growing awareness of the responsibility of individuals in being healthier (a much slower corporate awareness) and TJ’s has catered to that for decades.

Jim Leichenko
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Jim Leichenko
15 years 7 months ago

Regarding price-conscious consumers, I shop at Trader Joe’s partly because of the variety of foods and partly because of the prices. I pay 20-40% less for the same brands of “gourmet” or “specialty” products at Trader Joe’s than I do at either of Chicago’s main grocery chains, Jewel and Dominick’s. Shopping at Trader Joe’s opens your eyes to what a rip-off the regular grocer really is. That being the case, I still depend on my local grocers for a variety of everyday, name-brand products I cannot get at Trader Joe’s. I suspect most multi-store shoppers do the same for the same reason.

On a different subject, I have been disappointed with many of Trader Joe’s recent private label products because they are inferior copies of other brand’s products, which are no longer stocked on Trader Joe’s shelves.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
15 years 7 months ago

People still enjoy grocery shopping, despite the cognitive dissonance found in research responses to the contrary. TJ has ramped-up the experience meter in their stores, so people come. It’s a great place for hunters AND gatherers – discovery, surprises, new & unusual, and information.

They’ve also found a parade and gotten in front of it – which is some folks’ definition of leadership. The parade they found was the trend toward more and more private label in larger chains. TJ simply took it a step further, carrying nearly no national brands and featuring possibly the highest percentage of store brands than any other major chain.

Dennis Serbu
Guest
Dennis Serbu
15 years 7 months ago
Leich “gets it”. I have commented in the past regarding the lack of control over Private Label vs. Branded. You don’t usually discover there is a problem until long after a consumer has complained, or worse yet doesn’t complain. We have shopped TJ’s in Southern CA for over 15 years. The novelty then was brand names at low prices, unique exciting varieties, package closeouts and great deals on Wine and Liquor. As they evolved, the Trader Joes Brand became the mainstay. Sometimes it is good and sometimes less than satisfactory. Unless they have QA people camped in their Co-Packers they will always be at risk. When the majority of your “Brands” are Private Label that is pretty risky. Once the novelty of “New” wears off, Trader Joes will lose the appeal. They will certainly hold their own and retain a certain share, but this is not a retail model I would want to emulate. As for us, we used to be weekly shoppers, now maybe go in once every 6 weeks to stock up on… Read more »
David Livingston
Guest
15 years 7 months ago

To me, going to Trader Joe’s is like going to some surreal supermarket dream world in another dimension. In a way I feel privileged and special just to have one available to me now and then. Trader Joe’s is everything Wal-Mart isn’t. It’s like they have been granted immunity from the big box stores.

, Trader Joe’s usually attracts an unusual tenant mix in their shopping centers to further enhance the shopping experience.

Stan Houston
Guest
Stan Houston
15 years 7 months ago

I share some of the same positive comments regarding Trader’s selection and neighborhood access but, having done research recently on this very topic, I’m wondering if anyone has looked at their brand appeal emanating from more social attachment theory. Seems to us that most people shopping at Trader Joe’s fit a specific profile – and doesn’t that in itself become a draw? It’s not so much about buying Two-Buck Chuck as it is being seen buying it and socializing with your peer group.

Warren Thayer
Guest
15 years 7 months ago

No chain I know does a better job with its store flier than Trader Joe’s. Check out http://www.traderjoes.com for its “Fearless Flyer.” It’s easy to navigate, and clearly gives the credible message that “we’re your friend, here to help you.” It does so with fun and flair, helping build the experience and the brand. I can’t imagine why other chains still insist on LOWEST PRICES IN TOWN! and SAVE EVERY DAY! and 20 FOR $19! even when they would agree that such stances are not relevant to their, um, “mission statement.” Trader Joe’s just “is,” and it’s the genuine article. I keep hearing that retailers mustn’t reach “the tipping point” on private label of above 20% or 30% or 50%, with pious warnings about “remember what happened to A&P” decades ago. TJ’s has shown that private label can be so much more than most retailers ever dare let it be.

june zhao
Guest
june zhao
15 years 7 months ago

My friends and I are boycotting Trader Joe’s because they refused to stop selling eggs from caged hens. I cannot see them going too far if they are not consistent on branding themselves in the market place.

Jeff Schaengold
Guest
Jeff Schaengold
15 years 7 months ago
I became a TJ addict in the late early 80’s when I lived in Southern California. Every week, we would visit the Westwood store near Santa Monica. The store was buzzing with activity, narrow aisles, TJ brands, and bargains of the week. Besides the merchandise itself, the store experience was ‘fun’ which led to a higher propensity to spend…somewhat the formula of Stew Leonard’s. Last year, I also visited the TJ store in Westwood, NJ. Much like Bill, I was driving through this sleepy commuter town and I noticed a TJ. I also made a quick U Turn and pulled into the parking lot. Unlike TJ in Westwood, CA, we didn’t purchase anything. I may be a minority, but I almost fell asleep walking the aisles. The store bears no resemblance to the excitement and energy of the TJ I loved. I take it back. We purchased a couple of straw baskets that we threw out 60 days later because they started falling apart. Likewise, a couple of months later, I was driving on I-84… Read more »
robert spizman
Guest
robert spizman
15 years 7 months ago

I believe that Trader Joe’s is a sister division of Aldi, the other end of the branding spectrum!

Ben Ball
Guest
15 years 7 months ago

Karen makes a great point. The “time pressed shopper” and the shopper willing to make an “extra trip” to Trader Joe’s or another destination store are one in the same. The outlet determines the shopper’s attitude while there. Tell me you are the place to get the broadest selection at the cheapest price and that is why I will shop you. Tell me you are the most convenient way to buy a pack of cigarettes and a soft drink and that is how I will shop you. Offer me a unique experience that is consistently organized around a relevant lifestyle theme (ala Trader Joe’s, Whole Foods, Costco, or even Tuesday Morning) and I will come for the experience — the treasure hunt. The secret is in creating involvement with the experience. How much time do you spend in the store when you are shopping for your favorite hobby? Whether it is golf, wine, sewing or origami, you are going to spend more time there than on a shopping trip that you consider purely “utilitarian”.

Rick Moss
Guest
15 years 7 months ago
To me, the Trader Joe’s brand is meaningful because they’re not afraid to take a “point of view.” When you scan the overabundance of choices lining conventional grocery aisles, you have no confidence in management’s buying decisions. Or, more accurately, you have no expectation that the operator is recommending a product simply because it’s offered on the shelf. It’s buyer beware at best. With Trader Joe’s, you may not always share the buyer’s taste, but you know where they’re coming from. You have a sense of the overall “philosophy” behind the product offerings, so you can make your own purchasing decision based on standards of quality and price fairness. Regular TJ’s shoppers never suspect that they’re overpaying for a product and there’s always the feeling that TJ’s is “looking out for them” by testing each item before putting it on the shelf. Instead of trying to be all things to all people, grocers should try being the best thing for some people. I believe they’ll find the “some” will soon outnumber the “all” that they’ve… Read more »
Karen Kingsley
Guest
Karen Kingsley
15 years 7 months ago

I do believe Trader Joe’s is the ultimate brand. I actually select TJ’s brands over “branded” product when I shop there. TJ’s represents a value proposition too: the product may not always be the cheapest, but given relative quality, it is less expensive than other brands.

The question of the time-pressed shopper who shops multiple channels was explained in Nielsen’s study. The more consumers are exposed to a variety of products, the more demanding they become of variety and quality.

Nearly everyone I know shops at Costco, TJ’s, as well as a conventional market; many make extra trips to gourmet, natural markets or farmers markets as well. They are mostly working moms with little spare time. TJ’s truly falls under the rubric of “Build a better mousetrap…”

Mark Lilien
Guest
15 years 7 months ago

There are at least 2 forms of private label:

a. “commodity copy” (our version of Rice Krispies seems identical at 30% lower price)

b. “innovative version” (we have packaging or engineering or design or flavor or ingredients or production process that is fairly unique compared to other brands)

Trader Joe’s and Target are best at “b”. Mainstream supermarkets seem to focus on “a”. I suspect that excellent “b” performance leads to higher margins, greater loyalty, and reduced risk from competition. I suspect that excellent “a” performance leads to greater sales volume, which enables even lower prices.

M Swords
Guest
M Swords
15 years 6 months ago
In some ways, Trader Joe’s is emulating what has happened in the retail clothing industry. Gap, Banana Republic, Old Navy — all of these national retail chains focus on “private label.” If the retail clothing industry can do it, why can’t a specialty food chain? Many of their private labels are actually manufactured by name brands. I worked for a wholesale grocery supplier and the first thing the grocery store chain wanted to know was if they could have a private label. Volume is the key in private labels. In the case of a private label, it can be the exact same product or it can be slightly altered to maintain the branding of the company’s original product. And there isn’t much difference. Trader Joe’s is doing what any great retailer would do – reinforcing their identity over and over again throughout their store. Finally, your ability to “tie the customer to you” is essential in this highly competitive market. My experiences at the check-out stand have been superior. The friendliness of the cashier; the… Read more »
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