Trader Joe's: Worth the Hype?

Like IKEA, Apple products, and the next Star Wars movie, the arrival of a new Trader Joe’s is often hyped and dreamed of for years. There are broken promises, there are heated local debates, and in the end, some lucky residents are granted easy access to Cookie Butter, Mandarin Orange Chicken and “Two Buck Chuck,” served by a smiling employee in a Hawaiian print shirt. 

In 2015, Time magazine reported that Trader Joe's was, for the third year in a row, "named by consumers as their overall favorite supermarket in a survey conducted by Market Force Information."

Is Trader Joe’s truly worthy of this hype? Why don’t people feel the same attachment to other chain supermarkets like Fred Meyer or Safeway that they do to TJ’s? The answer is in a carefully crafted concoction of planning, financial savvy, and a healthy dose of human psychology.

The Trader Joe's Experience

The Trader Joe’s experience is markedly different from a typical grocery buying excursion. The first thing that will stand out to you when you enter is the size: I would still categorize Trader Joe’s as a big box, but its footprint is more comparable to a Walgreens or CVS, less to a Target or SuperValu. The Trader Joe's parking lot is also notably smaller than the typical grocery store lot (more on that in a moment).

Another aspect of Trader Joe’s that sets it apart from other chain grocery stores is the limited choices. Whole wheat bread or white bread? Milk chocolate or dark chocolate? In a nation flooded with options, where you could pick from literally 30 different types of toothpaste at your local drug store, it’s refreshing to only have to make a few decisions.

There’s a psychology behind why fewer choices can actually give people a better shopping experience (read more about it here). In addition, a small amount of choices and a modest store size mean that you can probably do a week’s worth of shopping in 30 minutes or less. There is no deciding between 10 different brands or weighing the 2 cents per ounce you might save on a sale item. In fact, the store never runs sales or offers coupons. As Trader Joe's website explains: "We buy direct from suppliers whenever possible, we bargain hard to get the best price, and then pass the savings on to you."

Because almost everything in the store is Trader Joe’s own branded items, that also means they sell a number of special products you won’t find anywhere else—undoubtedly a factor in the hype surrounding these stores. A glance at the list of TJ’s most popular foods from 2015 shows several items that are unique to this brand. They strike a balance between organic, healthy, affordable and easy to prepare—characteristics that are very much in vogue right now when it comes to food.

Another factor that differentiates Trader Joe’s from its competitors is that its employees are unusually cheery and helpful for grocery store clerks. Many have speculated that this is not just because of their hiring and training but also because they are paid well for their work. According to Glassdoor (a salary tracking website) Trader Joe’s employees all make well over minimum wage—$13+ in most locations for store clerks, and significantly higher for managers, plus benefits.

So how does a store with a smaller footprint, fewer choices and better paid employees attract so many enthusiastic customers and sell, according to Fortune magazine, “an estimated $1,750 in merchandise per square foot, more than double Whole Foods”? As Fortune magazine reported:

The rise of Trader Joe's reflects Americans' changing attitudes about food. While Trader Joe's is not a health food chain, it stocks a dizzying array of organics. It sells billions of dollars in food and beverages that years ago would have been considered gourmet but are now mainstays of the U.S. diet, such as craft beers and white-cheese popcorn. The genius of Trader Joe's is staying a step ahead of Americans' increasingly adventurous palates with interesting new items that shoppers will collectively buy in big volumes.

The company selects relatively small stores with a carefully curated selection of items. (Typical grocery stores can carry 50,000 stock-keeping units, or SKUs; Trader Joe's sells about 4,000 SKUs, and about 80% of the stock bears the Trader Joe's brand.)

A combination of unique products, friendly employees, modest store size, affordable prices, and fewer choices makes Trader Joe's an unusual and beloved store. 

Trader Joe's Value

But its value does not only lie in happy customers. Trader Joe's is also a boon for towns as a whole. In light of this week’s discussion on big box stores and tax productivity, I decided to look at Trader Joe’s value per acre as compared with another big box store.

As luck would have it, there’s a TJ’s in a suburb of my city (Brookfield) that happens to be right across the stroad from a Target, so let’s take a look at tax data for both of them. (I realize Target is not an exact comparison for Trader Joe’s because it sells more than just food, but since they were so close to one another, I thought the analysis would still be quite valuable.) 

Target (12725 W Bluemound Rd, Brookfield, WI)

Tax value: $215,843.20
Size (store + parking lot): 10.5 acres
Value per acre: $20,556

Trader Joe’s (12665 W Bluemound Rd, Brookfield, WI)

Tax value: $67,580.51
Size (store + parking lot): 1.5 acres
Value per acre: $45,053

Trader Joe’s value per acre is $45,053, making it more than twice as productive per acre as the Target next door. And that’s in an incredibly suburban area. Many Trader Joe’s are located in more dense, urban and mixed-use areas, which probably means they are even more productive. The Trader Joe’s I grew up going to was on the first floor of an apartment complex. The Trader Joe’s I frequented in New York City was next to a Subway stop and again, on the bottom floor of a large apartment building.

I'd be remiss if I didn't mention Trader Joe's notoriously small parking lots, which I wrote about in more detail this March. The internet is full of complaints about Trader Joe's cramped and crowded parking lots, but I think they're actually part of the strategy and success of the store: A smaller parking lot means lower development and maintenance expenses, and a more productive use of space. It also means that Trader Joe's can blend in with smaller stores and residential units around it, instead of requiring massive designated turn-lanes and huge amounts of land just to function.

Here's the Trader Joe's I frequented during my childhood in Minneapolis (although this store is technically in the nearby first-tier suburb of St. Louis Park):

As you can see, the parking lot is quite modest, with about 50-65 parking spots. Here's an on-the-ground view:

In the above picture, you can see that the grocery store is actually a very small part of this multi-story housing complex. Residents of the housing units have underground parking, with an entrance on the far right. In addition, this store is located on a bus route and offers several bike parking options (not pictured). While the store does front a stroad, it's in a suburban-urban border area that has been moving in the direction of walkability and mixed-use, with tons of restaurants and shops, all close to residential neighborhoods. 

Trader Joe's modestly-sized lot and store here demonstrate a value of space and an interest in making the best use of it. That means higher profits per square foot for the owners and higher tax payments per square foot for the municipality, plus a convenient, affordable grocery store for residents. Everyone wins.

Conclusion

This week, we’ve talked a lot about making use of a big box space after the big box store has departed (and whether it’s even possible), but here’s another tactic: Build a retail space with a more modest and adaptable format in the first place. Trader Joe’s is doing just that. Unlike a Target or Walmart, which we’ve only really seen repurposed as massive libraries, museums, and churches, most Trader Joe’s buildings are less than an acre in size, meaning they could become any number of spaces: offices, gyms, clothing stores, daycares, restaurants, and so on.

Even better, Trader Joe’s is also not in the habit of ditching its old stores to move half a mile away into a bigger space: The company has its store model figured out. There is no Super Trader Joe’s or Trader Joe’s Plus. There is just one modest store that has been replicated throughout the country (with small variances in floor plan and form). 

After almost 50 years in operation, Trader Joe’s still employs a very unique model: small-scale stores, limited options, branded products and affordable prices. That's a great value for both individuals and communities. As the store explains on its website: “In 1967, the first Trader Joe's opened its doors in Pasadena, California. Still there today - same spot, same parking lot.” And that has made all the difference.

(Top photo by Dwight Burdette)

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