4 Lessons from Becoming Trader Joe: How I Did Business My Way and Still Beat the Big Guys

Late grocery magnate Joe Coulombe wasn't always Trader Joe.

Before launching Trader Joe's in 1967, Joe Coulombe led Pronto Markets, a convenience store chain mimicking 7-Eleven. When 7-Eleven entered the California market, Coulombe recognized the need for change. This realization led him to develop Trader Joe's, a store that would help revolutionize grocery retailing with its unique approach.

And so by the time Trader Joe's opened in 1967, Coulombe had learned a lot about navigating grocery laws and practices, retaining labor and differentiating yourself from the competition. Putting all that into practice didn't just make Trader Joe's a success-it helped change how grocery retailing worked in California and beyond.

In Becoming Trader Joe, Coulombe shares his journey, what he learned, how he analyzed the market and how he kept ahead of the competition during his tenure from 1958 to 1988.

Here are the four foundations that drove every decision he made and helped him disrupt the grocery industry-valuable lessons for every retailer.

• Happy frontline employees are the foundation of a successful business
• Product knowledge is the true secret to success
• Treat customers like adults
• Always focus on differentiation

1. Happy frontline employees are the foundation of a successful business

"My ideal, often stated to everybody, was that Captains [store managers] should have the chance to make more than executives in the office. In a traditional chain store, managers aspire to become bureaucrats with cushy, high-paying jobs in the office. I wanted to kill such aspirations at the start."

Joe Coulombe, Becoming Trader Joe: How I Did Business My Way and Still Beat the Big Guys

Trader Joe's compensation strategy during Coulombe's tenure wasn't about confining store employees to their roles; it recognized them as experts essential to the business' success.

Coulombe firmly believed that well-paid, happy frontline employees make your business.They make happy customers. They represent your brand to the public. As such, they need to be in the center of all you do. You need their buy in.

And while this approach helped keep employees happy, it wasn't just about fair labor practices. In what Coulombe calls selfish altruism, he feels his approach could solve many problems faced by retailers, such as high turnover and low morale.

Throughout the book, he outlines various strategies for ensuring your frontline is proud to work for you, like:

• Lower internal theft by compensating well:"If employees are stressed by medical bills, they may steal. That's one good reason for Trader Joe's generous health and dental plans." Trader Joe's also had generous wages, making a store employee position a viable career choice.
• Prioritize shorter opening hours:"Since few employees like to work midnight shifts, the wheat inevitably migrates to the day shifts; the chaff to the late-hour shifts."
• Keep employees informed: Coulombe insisted on transparency with his employees, more than his business partners may have liked. Lying to employees or keeping them in the dark creates an environment of distrust.
• If hard times call, consult your frontline:"In any troubled company the people at lower levels know what ought to be done in terms of day-to-day operations. If you just ask them, you can find answers."

2. Product knowledge is the true secret to success

"As we evolved Trader Joe's, its greatest departure from the norm wasn't its size or its decor. It was our commitment to product knowledge, something which was totally foreign to the mass-merchant culture, and our turning our backs to branded merchandise."

Joe Coulombe, Becoming Trader Joe: How I Did Business My Way and Still Beat the Big Guys

Coulombe had a particular idea about what a retailer was. In his words, the fundamental job of a retailer is "to buy goods whole, cut them into pieces, and sell the pieces to the ultimate consumers."

For Trader Joe's, this meant that while offering quality products was crucial, the knowledge about those products was even more important. Trader Joe's had to be deeply involved in their supply chain.

This didn't necessarily mean Trader Joe's had to lean into product continuity. It could be-and for a long time, would be-enough to have deep enough product knowledge to assure customers they'd always find high quality products. Customers would trust Trader Joe's would pick well, because they knew what they were talking about.

Coulombe has a lot of advice about curating your catalog, but product knowledge underlies it all. In particular, he takes care to emphasize:

• Make sure buyers are product knowledgeable:a buyer who doesn't understand what he's buying will make costly mistakes. Buyers should be expected to be product experts.
• Don't fear discontinuity:particularly in the early years, Trader Joe's promise was well priced high quality products, not having the exact same prices on the shelves every visit. This trained customers to trust their choices, and enabled a scrappy, stock-what-you-can approach that helped them manage costs and market shifts.

3. Treat customers like adults

"There are no such things as consumers-dolts who are driven by drivel to buy stuff they don't need or even want. There are only customers, people who are reasonably well informed, and very well focused in their buying habits."

Joe Coulombe, Becoming Trader Joe: How I Did Business My Way and Still Beat the Big Guys

Coulombe's belief in treating customers as knowledgeable individuals shaped Trader Joe's marketing and service strategies. By acknowledging customers as discerning and well-informed, Trader Joe's created a community that wanted to learn from them.

Retailers who want to foster a cult brand following like Trader Joe's has should heed Coulombe's wisdom:

• Suggest and educate when selling, don't command:"One should never use a mandatory sentence in addressing a customer; should never give orders. The subliminal message of a Trader Joe's commercial is, 'We're gonna be around for a long time.'"
• Trust them to appreciate new tools and processes: Trader Joe's was one of the first grocers in the US to take Visa and Mastercard, a move Coulombe admits was radical due to the fees charged to retailers. But the old payment methods, particularly checks, were a liability that weren't working for the business. Implementing a brand new payment method and trusting customers to get on board meant as adoption of that payment method spread, Trader Joe's could accept it before the competition.
• Know your ICP's values, not just their buying habits:"…it occurred to me that people who really thought about what they ingested, whether they were wine connoisseurs or health food nuts, were basically on the same radar beam," says Joe, describing the ideal Trader Joe's customer. This insight into the whyhelped Coulombe build a store that would outlast product trends.

4. Always focus on differentiation

"Most independent supermarkets have been driven out of business, because they stupidly tried to compete with the big chains in plastic goods, in which the big chains excel."

Joe Coulombe, Becoming Trader Joe: How I Did Business My Way and Still Beat the Big Guys

Ultimately, a business needs to bring something new to the table. Trying to outcompete established brands, says Joe, is a losing game. Trader Joe's succeeded by doing it differently than the big names.

This translated to a lot of pivoting, and pivoting fast, in the early days. For Coulombe, the Trader Joe's project was less about building a grocery store and more about putting his beliefs-beliefs about labor, product sourcing, advertising and more-into practice and seeing what kind of store grew from there.

As they evolved, Trader Joe's followed Coulombe's retailing philosophies to help create differentiation:

• Deemphasize the importance of competitors when picking locations: "Except for rare geography and even rarer honest city councils, you must assume that competitors will open all around you." Coulombe says it's more valuable to build a store that has no competition, and as such to focus on picking locations that are best for your customer and your workers without any consideration for competitors nearby or not.
• Only carry outstanding products: so your competitor carries a full line. So what? According to Joe, unless every entry in that line is outstanding, curate what you're stocking. Less can be more in retail, and for Trader Joe's, that approach meant customers trusted them to carry things worth buying.

From the mind of Trader Joe

"This is the most important business decision I ever made: to pay people well."

Joe Coulombe, Becoming Trader Joe: How I Did Business My Way and Still Beat the Big Guys

Joe Coulombe helped revolutionize the retail industry. He was a man of strong opinions whose foresight helped weather storms, widen markets and steer retailing in the modern day.

When Coulombe wrote Becoming Trader Joe, he made a prediction that online grocery sales would never take off the way ecommerce has, because the logistics are too particular. As we know now, this prediction was false: online grocery sales are growing steadily.

Then again, given Coulombe passed in February 2020, he can be forgiven for not seeing the disruption on the horizon.Coulombe's other advice has held up better. His advice on treating (and paying) employees well, for example, is prescient in an era where pay level satisfaction and enjoyable work factor highlyin an employee's decision to stay or quit.

Long after Coulombe left, Trader Joe's has retained a cult following, a loyal community that resonates with the culture, quality and service ethos he built. While his advice and tactics may not work for every retailer, his wisdom and experience are still worth consideration in a rapidly changing industry.

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