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The Trader Joe's customer experience
Trader Joe's is a hugely successful grocery chain that has built its success on creating a good customer experience: friendly staff, low prices, and most importantly, high-quality items.
The twist is that there are only a couple of options in any given product category. A new profile in Fortune describes how it works:
Customers accept that Trader Joe's has only two kinds of pudding or one kind of polenta because they trust that those few items will be very good.A closer look at its selection of items underscores the brilliance of [Trader Joe's] limited-selection, high-turnover model. Take peanut butter. Trader Joe's sells 10 varieties. That might sound like a lot, but most supermarkets sell about 40 SKUs. For simplicity's sake, say both a typical supermarket and a Trader Joe's sell 40 jars a week. Trader Joe's would sell an average of four of each type, while the supermarket might sell only one. With the greater turnover on a smaller number of items, Trader Joe's can buy large quantities and secure deep discounts. And it makes the whole business -- from stocking shelves to checking out customers -- much simpler.
Trader Joe's increases sales by reducing choice. And that's a good customer experience because it makes shopping much simpler. As long as all the options are good products, it's quicker and easier to choose from three options than to choose from 30.
If this discussion about choice sounds familiar, you might refer to my interview with Barry Schwartz, the Swarthmore professor and author of The Paradox of Choice. He also spoke at Gel 2005 - here's the video.
In general, though, Trader Joe's teaches once again that creating a good customer experience is the key to long-term success.
(hat tip to andy)
I'm interested in opinions on the "low prices" part of this equation. I live in a "Trader Joe's free" zone, but have shopped there a couple of times while traveling. In my experience, other than a couple of loss leaders, I found the prices high, not low, in comparison to my normal shopping sites. That may be due to the lower costs of living where I live -- I'm curious as to the opinions of others with more Joe's experience.
I shop at Aldi for groceries because for the basics they have only one choice, their brand. I can get in and out quickly, too.
This reveals something about what our local super/mega marts really are, doesn't it?
If a supermarket sees itself as a place that leverages things like endcaps and optimal shelf location and selling information from customer loyalty cards, rather than actively managing its inventory based on customer preference, then it's really just a magazine (or other ad-dependent entity) that happens to sell apples, isn't it?
Been there once (Union Sq.), and spent way too much time waiting in line. I will not come back (and I know I'm not the only one...)
Yony's comment is interesting and might be an isolated instance. In the suburban Chicago area, I'm intimately acquainted with 3 different Trader Joes and it is seldom that a checkout line gets longer than 2-3 people. They open another register. It's very fast in and out and by the way, prices are competitive or cheaper than the grocery chains around here. I love Trader Joe.
I live in the suburbs of NYC and I shop at TJs once every other month. I stock up on particular TJ items that are better quality for less or specialty items that typical supermarkets don't carry or the quality is not as good as TJs. I end up spending more than I intend to because they usually have seasonal items that I want to try out. I like that they are very friendly and helpful and always have an item to test at the test counter. There have been only a few items that I didn't like after purchasing them. I find what they stock to be of high quality.
Pretty sure that the Fortune explanation is wrong - grocery stores get marketing money from suppliers to stock their shelves. Somehow TJ has found a way to make money despite forgoing significant marketing money.
I live in Colorado where we do not have TJs for a variety of reasons, most likely our antiquated liquor laws. There are lobbying groups that keep the laws from changing, but there are multiple Facebook pages and tons of support from regular people hoping that TJs will come. They have totally nailed the customer experience.
And to your commenter who said the lines were too long... The problem is that the place is too popular? I'm sure if TJs could put a location on every corner in NYC the lines would go down.
Mary, you're right. I know long lines at TJs are a problem (to some) in NYC, but I don't know about other places...
Michael's comment is spot on, and points to a larger issue:
> Trader Joe's teaches once again that creating a good customer experience is the key to long-term success.
Trader Joe's teaches that creating a good customer experience is *one path* to long term success. Regular supermarket chains have been, in total, much more successful than TJ's or other "good experience" grocers, with a mostly deceitful customer experience (milk farthest from the door, etc).
This is a great article Mark and a helpful reminder of the paradox of choice work. People still think that more choices is good when often it's presenting the customer with a few great options to choose from. TJ's does this well!
Shop there 'cause I really like a house brand item (V-8 like tomato/veg juice).
Never had a problem with lines.
Try to buy a bottle of tonic to go with the gin they sell - which ain't particularly cheap, anyway. Limes are good, though. I give them an "Incomplete".
Rick Melzig
Los Gatos, CA
I've had more produce go bad faster than expected (as in the next day) from Trader Joe's than anywhere else. Many others I talk to have noticed the same thing. I'm not so sure that the quality is there.
I love Joes. The article is right about a number of things including less choice but high quality of offerings. As for customer experience, I went in once to buy milk. They were all out of gallon jugs of milk. I asked if they had any in the back. The staffer said no. He then said, take 2 half-gallon cartons (which were more expensive than 1 full gallon jug) and tell the cashier that he said she should only charge me the full gallon price. She did just that.
Simple and brilliant, and something that no large retailer would do.
That kind of service kept me coming back -- until I moved to a place with no Joes. :-(
In the above situation, sounds like the staffer had the ability to do the right thing by the customer but the manager wasnt doing his job! The manager should have made sure there was a deal for 2 half-gallon jugs. Sometimes these small things can destroy all the goodwill we create with our customers. I hope he got on to it straight after you told them.
This is definitely more a lesson in strategic choice limitation and product placement than any of the other P's in marketing. I had the pleasure of living two doors down from a TJ's and went through withdrawal when I didn't have them anymore after I had to move.
@ Mark - yes, I find their prices are higher as well. I live in expensive SF Bay Area. The image has always been they cost more, and my experience validates that as well. Hard to compare really though since selection is so different.