So what’s really going on here? Trader Joe’s uses product and pricing strategies that could easily be emulated by other chains that sell quick-turn consumables. But Trader Joe’s is not just privately held, it is fiercely private, making every effort to fend off any effort to learn how it works.
We do know, however, that Trader Joe’s net sales-per-square-foot are roughly twice those of the similarly situated Whole Foods. And Trader Joe’s performs better in smaller selling spaces, with about a quarter of Whole Foods stockkeeping unit count.
That’s impressive, but the real secret formula is Trader Joe’s product lineup. More than 80% of Trader Joe’s 4,000 SKUs are private brands, most under the Trader Joe’s name, and others under offshoots such as Trader Jose’s (Mexican food) and Trader Josef’s (baked goods), and so on.
Trader Joe’s is known for its quirky merchandising, shrouding its proprietary products with a sort of mystique that loyalist shoppers find quite appealing. Customers come to Trader Joe’s for the unique products that they won’t find anywhere else. And those products are priced substantially lower than those of most competitors, particularly those of Whole Foods.
So what products draw these shoppers back to Trader Joe’s over and over again? Well, not long ago, Trader Joe’s briefly published on its web site a list of nearly 30 products — or roughly 8% of its product range — that customers ranked from top to bottom according to which they liked best. The list was compiled using an email polling of shoppers, and shouldn’t be confused with a “best seller” list. In most instances, shoppers picked as their favorites products those in the “indulgence” or snack category. Topping the popularity list was the store brand Speculoos Cookie Butter. That’s a spread for bread similar to peanut butter, except that it contains no nuts. Instead it’s fashioned from a sort of spicy Belgian cookie. The cookies and the spread it spawned are readily available in Belgium, but neither is well known in this country. Curiously, frequent flyers will find it as an “airline cookie,” offered as a treat on Delta Airlines.
Also ranking high on the list is Trader Joe’s proprietary Charles Shaw wines, of all varieties. That’s the popular “Two Buck Chuck” wine. It remains popular despite the fact that its price is creeping above $2 in many markets, including the chain’s home market of California.
Exclusivity, whether in the luxury market or the grocery store, is a compelling marketing strategy. All things considered, shoppers will pick a destination store based on specialized products and brands not readily available elsewhere. These products transcend commodities; they become necessities by choice. That, combined with attractive pricing, and the appealing narratives or story telling about these products, is what helps insulate Trader Joe’s from both conventional and online competitors. This is a lesson that many of Trader Joe’s competitors could take to the bank.