Michael Roberto, a business professor at Bryant University, likes to start one of his lectures with this Shark Tank scenario:
“Imagine you’re an investor on an episode of Shark Tank, and a hopeful entrepreneur presents the following pitch, asking you to invest: ‘I’d like to open a new kind of grocery store. We’re not going to have any big brand items — it’ll all be private label. We won’t do any advertising or social media whatsoever. We’re never going to put anything on sale, we won’t accept coupons, we’ll have no customer loyalty card, so we won’t be tracking their data, and we won’t have wide aisles or big parking lots.’”
Anybody getting their checkbook out at this point?
I’d be the first to say that this sounds like an unlikely business strategy at best, and I doubt that many of us would think that a company with this kind of business model could survive for long. However, not only does this grocery store exist, it’s been in business since 1967, and today, it’s beating the competition by a wide margin.
Yes, I’m talking about Trader Joe’s.
I heard Roberto’s mock Shark Tank scenario in a podcast entitled “Should America Be Run By … Trader Joe’s?” Roberto explains how this unlikely little California surf-inspired grocery store chain has continued to be profitable for more than 50 years, and how they have not only loyal customers, but adoring fans, in spite of the fact that the business model seems to contradict everything (or a lot of things) that successful businesses are supposed to do. Roberto also mentions this whopper of a statistic: “Trader Joe’s sales-per-square-footage estimates are unbelievable. I mean, three and four times better than some of the leading players in the industry.”
What are the secrets to Trader Joe’s success and what can we learn from them?
In the podcast, host Stephen Dubner and his guests talked about several possible reasons for Trader Joe’s success, and they were all good — but two stood out to me as being not only the most influential, but the most intriguing and relatable from my perspective as a business owner.
The Friendliest (and Chattiest) Crewmates Around
A privately-owned company, Trader Joe’s is famous for maintaining a high level of secrecy, so most of the stuff we know about the company’s business model comes from people who have spent years studying the company — not from the owners or executives. One such person is Mark Gardiner.
Gardiner is a former advertising executive who became so intrigued (I think he even used the word “obsessed”) by the chain’s success, he did what any self-respecting ad exec would do: he quit his cushy job in advertising and started working undercover as an entry-level employee at Trader Joe’s to learn first-hand how it was done! He eventually compiled all of his research in a book entitled, Build a Brand Like Trader Joe’s, and he now teaches other companies how to implement some of TJ’s revolutionary strategies.
Out of all the things that the company apparently does right, Gardiner’s biggest takeaway, and what he teaches most, is the Trader Joe’s value system – particularly regarding customer experience. Gardiner said that the managers (TJ’s calls them “captains”) didn’t talk to new employees (“crew mates”) so much about the usual grocery store stuff as they did about how they should be with the customers. He said that, if you were doing something for a customer, “that trumped everything.”
I have to admit that I am NOT the grocery shopper in our family (shocker!). However, I’ve been there a time or two and I know my wife and daughter are big fans. If you have shopped at Trader Joe’s, you’ve probably noticed that there are always a large number of employees at the registers and throughout the store. There’s usually a friendly, Hawaiian-shirt-wearing crewmate within a few feet of anywhere, popping about, just “making sure you’re finding everything okay.”
You might also have noticed that there’s a lot of stocking of the shelves going on while you’re there. This is no accident. According to Gardiner, part of Trader Joe’s customer service philosophy is for the crew to stock the shelves during business hours in order to maximize customer interaction. Gardiner said that the captains would tell them to look for customers who seem like they can’t find what they want and initiate a conversation with them – even to the point of being chatty — and that the most important thing was for customers to feel valued.
How many companies do you know that prioritize gab over pure efficiency and output? I found this fascinating — not just that it’s their philosophy, but that it actually works.
This might be a good time to switch gears. I want to tell you what prompted me to write this article.
I consider myself to be a quick decision maker, but there are times when I pop onto Amazon.com for what I think will be a simple 5-minute-or-less investment of time, only to leave the site 30 to 60 minutes later frustrated and not having purchased what I wanted because I couldn’t make up my mind. This surprising, frustrating experience that should have been so simple leads me to ask:
“What the heck just happened???”
Read the answer to this question in next week’s blog and find out how it’s related to, in my opinion, Trader Joe’s most surprising and unique secret to success!