Trader Joe's is a specialty grocery store chain known for its unique store experience and discounted prices on exotic food products. The company was founded in 1958 as Pronto Markets by Joe Coulombe and adopted the Trader Joe's theme in 1967. It has experienced rapid growth since being acquired by the German retailer Aldi in 1979. Trader Joe's success is attributed to providing convenience through small store formats, limited product selections, and helpful in-store materials; a unique shopping experience through tropical store designs, local touches, and quirky product names; and value through private label products and efficient operations that allow specialty items to be priced competitively.

1. 15
Trader Joe’s – An Experiential
Discount Retailer Conquers the
Culinary Seas
ClausEbster1
&Riem Khalil2
”I think we should be traders on the culinary seas.”
Joe Coulombe, Founder of Trader Joe’s
1. A new kid in town
Orlando, FL, April 10, 2015, 5:00 a.m. The warm Florida sun had not risen and yet,
there were already long lines of people in front of a new, nondescript strip mall on Orlando’s
Sand Lake Road. Inside the building, staff members were hurriedly preparing for its
8:00 a.m. grand opening. Observers, looking at the people waiting in line, were reminded
of groupies eagerly awaiting a pop star or Apple aficionados waiting for the opening of a
shiny new Apple store. Their object of desire was, however, far humbler: A discount grocery
store. Trader Joe’s had arrived in town.
Not only were shoppers eagerly awaiting the opening of this new store; retail analysts
shared their enthusiasm. In the OC&C Retail Proposition Index, based on factors such as
service, trust, store look and feel, quality of products and value for money, Trader Joe’s
ranked second among all U.S. retailers, after online merchant Amazon.com. In a survey by
Market Force, American consumers declared Trader Joe’s their overall favorite supermarket.
Moreover, Trader Joe’s is highly successful economically. Since the company is privately
held and has a reputation for secrecy, retail statistics are hard to come by. However, in 2014,
sales per square foot (approx. 0.09 square meters), a key retail metric, was estimated to be
around $1,734. This is more than double the $930 reported by Whole Foods Market, one
of its fiercest competitors now owned by Amazon.
Who is Trader Joe’s and which factors account for the company’s success?
2. The original Trader Joe and his German brothers in spirit
There is, in fact, an actual Trader Joe. Joe Coulombe is a Stanford graduate and
entrepreneur who grew up in Southern California. After graduating from college, he started
working for a drugstore chain and soon after, in 1958, launched a small chain of convenience
stores he named Pronto Markets. It was a favorable time for retailing because in the late
1
Claus Ebster ist Universitätsdozent am Lehrstuhl für Marketing der Universität Wien und Geschäftsführer
von Market Mentor Shopper Marketing Consulting.
2
Riem Khalil ist Account Executive bei Market Mentor und Lektorin an der Donau-Universität Krems.
1 CEO of Market Mentor Shopper Marketing Consulting and Associate Professor
at University of Vienna
2 Account Executive at Market Mentor and University Lecturer at Danube University Krems

2. Trader Joe’s
16
1950s, following Word War II, California’s economy boomed and there was an influx of
people from other parts of the country who were in search of the “California Dream”.
However, a threat was on the horizon that caused Joe Coulombe to reconsider the economic
viability of his business. 7-Eleven, a much larger, Texas-based chain of convenience stores,
followed its customers westward and entered the Southern California market. This
ultimately led him to change both the name and the positioning of his stores in 1967.
In an interview he gave to the Los Angeles Times many years later, Joe Coulombe
reminisced about the founding of Trader Joe’s and the concept on which it was based:
I had opened a chain called Pronto Markets. I got financing from Adohr Milk Farms, but in
late 1965, Adohr was bought by 7-Eleven, which meant the 800-pound gorilla of convenience
stores was not only coming to town but now owned my source of capital. So I had to do something
different. Scientific American had a story that of all people qualified to go to college, 60% were
going. I felt this newly educated — not smarter but better-educated — class of people would
want something different, and that was the genesis of Trader Joe's. All Trader Joe's were located
near centers of learning. Pasadena, where I opened the first one, was because Pasadena is the
epitome of a well-educated town. I reframed this: Trader Joe's is for overeducated and underpaid
people, for all the classical musicians, museum curators, journalists — that's why we've always
had good press, frankly!
Early on, Joe Coulombe decided that he would not try to appeal to a mass market but
instead focus on his target group, educated consumers ready to try specialty products,
preferably at discount prices.
Joe Coulombe gave his stores a unique theme. After soldiers came back from battles in
the South Seas and in particular after Hawaii became the 50th
U.S. state in 1959, a “Tiki
craze” swept the United States. Tiki can be defined as the idealized culture of the South
Pacific. This romanticized version of an exotic Polynesian island lifestyle allowed consumers
to escape from their everyday lives and in the 1950s and 1960s was adopted by many bars
and restaurants. Unlike traditional supermarkets which focused on an efficient and
utilitarian design, Coulombe designed his stores in this nautical island theme to set them
apart from the competition and provide shoppers with a carefree shopping experience,
which complemented the exotic products that he introduced to his customers. The name
Trader Joe’s fit into this theme. It was modeled after Trader Vic’s, a once popular chain of
Tiki bars.
In the next decade, the Trader Joe’s chain grew at a slow pace and opened about one new
store per year. All its stores were still concentrated in Southern California. This was a
deliberate strategy to retain the company’s local feel and to ensure a consistent high quality
in all stores.
In 1979, after two years of on and off negotiations, Trader Joe’s was acquired by Theo
Albrecht, owner of the German discount grocery retail chain Aldi North. At first glance,
Aldi stores (both in Germany and the United States) look and feel very different from

3. An Experiential Discount Retailer Conquers the Culinary Seas
17
Trader Joe’s. While shopping at Trader Joe’s feels playful, quirky and sophisticated, Aldi
stores (which in the U.S. are operated by his brother’s company, Aldi South) look much
more like a traditional discount grocer: efficient, no-nonsense and somewhat stark. A closer
examination reveals, however, the many similarities between these seemingly opposite
companies and explains why Albrecht was eager to acquire Trader Joe’s. The similarities as
well as the differences between Trader Joe’s and Aldi are shown in Figure 1.
When Trader Joe’s was taken over by Aldi North, Joe Coulombe stayed on as CEO for
another decade. Trader Joe’s new German owners ran the company in a relatively hands-
off fashion. According to media reports, they only came to Trader Joe’s California
headquarters once a year. One change they insisted on, however, was faster growth. In 1993,
Trader Joe’s opened a store in Phoenix, Arizona, the company’s first store outside
California.
As of the beginning of 2018, Trader Joe's operates more than 470 stores in 41 states. It
has 8,000 staff members on its payroll and, according to an estimate by industry analyst
IBISWorld, in 2017 it has generated approximately $16.7 billion in retail sales. Its share of
the highly fragmented supermarket industry is 2.6%. In comparison, market leader Kroger
has a market share of 15.8%, specialty food retailer Whole Foods Market 2.5% and Aldi
U.S. 2.2%.
Figure 1: Trader Joe’s vs. Aldi: Similarities and differences

4. Trader Joe’s
18
3. The four pillars of Trader Joe’s success
Retail analysts, as well as the mass media, attributed Trader Joe’s success to a variety of
factors. Many of them become evident when visiting and carefully analyzing one of their
stores. The factors that differentiate Trader Joe’s from the competition and contribute to its
desired position in the minds of its target customers can be divided into four categories:
Convenience, experience, value and customer service (see Figure 2).
3.1. Convenience
Trader Joe’s makes shopping easy and convenient. Trader Joe’s stores are much smaller
than most American supermarkets: many are around 12,000 to 15,000 square feet. In
comparison, the average American supermarket has a size of about 45,000 square feet. The
relatively small size and simple layout (see Figure 3) make shopping more convenient than
in a supermarket, a large supercenter like Walmart (180,000 square feet) or even at a Whole
Foods Market.
Trader Joe’s also has quite a limited product range. A typical U.S. supermarket carries
about 50,000 stock keeping units (SKUs); Trader Joe’s carries only 4,000. The small
selection is actually an advantage. As consumer research has shown, shoppers like to have
choices, but they are often overwhelmed by too many. In a famous in-store experiment,
psychologists Sheena Iyengar and Mark Lepper were able to demonstrate that shoppers are
considerably more likely to make a purchase when facing a small product selection instead
Figure 2: The four pillars of Trader Joe’s success

5. An Experiential Discount Retailer Conquers the Culinary Seas
19
of a larger one (e.g. six different types of jams offered for sale instead of 24). They termed
this phenomenon the choice overload effect. At Trader Joe’s, choice overload is not a
problem. Because of the limited selection, shopping is simplified.
Another way Trader Joe’s facilitates shopping is to include nutritional icons on the
packaging of its private label brands. In keeping with the preferences and sensibilities of its
target group, it has developed symbols that signify product attributes (see Figure 4). Note
that in addition to symbols that provide nutritional information, there is an icon for “quick
meal” products, a product category favored by many of its time-starved customers.
Shopping is also facilitated by helpful product shelf signs. These signs help shoppers with
their choices by pointing out what is special about the product or how to use it. The
company has a simple but helpful website with product tips and creative recipes.
Figure 3: Typical layout of a Trader Joe’s store
Figure 4: Trader Joe’s nutritional icons
Source: RFF Retailer

6. Trader Joe’s
20
Furthermore, they publish a newsletter, their trademark “Fearless Flyer.” The flyer follows
the “less is more” principle as well. It focuses only on a few select products but offers the
reader comprehensive information about them. Of course, in-store shelf signs point to the
products described in the flyer. This is convenient for the shoppers and a highly effective
sales promotion tool for the company.
Shopping is also facilitated by helpful product shelf signs. These signs help shoppers with
their choices by pointing out what is special about the product or how to use it. The
company has a simple but helpful website with product tips and creative recipes.
Furthermore, they publish a newsletter, their trademark “Fearless Flyer.” The flyer follows
the “less is more” principle as well. It focuses only on a few select products but offers the
reader comprehensive information about them. Of course, in-store shelf signs point to the
products described in the flyer. This is convenient for the shoppers and a highly effective
sales promotion tool for the company.
Video 1: Convenience: https://tinyurl.com/ybfkxswp
3.2. Experience
Trader Joe’s creates a unique shopping experience. Many grocery stores offer relatively
little in terms of experiential shopping. Most supermarkets are fundamentally alike, and
they look and feel the same. Trader Joe’s is different; it has a unique look to it. As pointed
out in the introduction, all Trader Joe’s stores are decorated in what could best be described
as a tropical Tiki style. Artifacts employed to create this theme include murals depicting
island scenes, tropical birds, orchids and tiki masks (see Figure 5). In keeping with the
theme, store associates wear Hawaiian shirts.
For many consumers, grocery shopping is an everyday, utilitarian activity, but at Trader
Joe’s it becomes an experience, a mini-shopping adventure. Trader Joe’s peculiar and
somewhat corny store design helps differentiate it from other supermarkets. And in
marketing, differentiation is a good thing!
Trader Joe’s stores have a personal touch. All Trader Joe’s stores have a common theme
but nevertheless, they emphasize individuality and regionalism. This can be seen in the
decorations used in the store that opened on Sand Lake Road in South Orlando. They

7. An Experiential Discount Retailer Conquers the Culinary Seas
21
feature murals of orange groves, flamingos, and other visual symbols of the local Central
Florida landscape. This local feel is similarly emphasized by the signs, which are handcrafted
by the staff members in each individual store. Customers know what to expect when they
enter a Trader Joe’s but no two stores look identical, which is appealing to many shoppers
and contributes to their sense of identity and individuality.
Trader Joe’s is fun. It is quirky by design. This fun factor can be seen in the signs
throughout the store. Instead of a traditional intercom system, they use bells as their
communication system of choice. Humor is also apparent in the product names, which give
a kind of wink to the shopper. For example, a lemon-flavored herbal tea is named “If Life
Gives You Lemons…” or a cheese “Unexpected Cheddar Cheese” (see Table 1 for more
unusual product names). Italian products become Trader Giotto, Spanish products Trader
José and Asian products Trader Ming. There is fun for the kids as well. In each store, there
is a hidden plush animal like a peacock or a crane. If a child – or even an adult – points out
the location to a cashier, they receive a little gift.
The shopping experience created by Trader Joe’s extends to the type of products it
carries. Many of Trader Joe’s products are unique. While Trader Joe’s has a limited selection
of products, the products they carry feel distinct and exclusive. The vast majority of their
products are store brands, which helps the company keep their prices low. However, these
private brands do not feel in any way second-rate. In fact, many of them (e.g. canned jack
fruit or organic coconut aminos seasoning sauce) appear quite exotic and upscale. This is
Figure 5: Tiki décor in Trader Joe’s
produce department
Figure 6: Tasting station

8. Trader Joe’s
22
more in line with what shoppers would expect at an upscale specialty grocer like Whole
Foods Market or Zabar’s (a gourmet store in New York City) rather than a traditional
supermarket, let alone a discount food store like Trader Joe’s. Essentially, Trader Joe’s offers
gourmet foods at discount prices.
To some consumers, shopping at the store feels like a treasure hunt, with unusual and
unexpected items to be found. Trader Joe’s frequently introduces new products, which help
to keep the product range fresh and exciting. On the flip side, a considerable number of
products are only available for a limited time. This is done on purpose: Based on the
economic scarcity principle, the limited availability increases their perceived value. It
encourages repeat visits – and it allows Trader Joe’s to eliminate less profitable items quickly.
Each Trader Joe’s has a tasting station, located in a prominent location within the store
(see Figure 6). Providing product samples helps the company introduce shoppers to new
products. The resulting interactions between shoppers and staff members further enhance
the customers’ emotional connection with the store.
Video 2: Experience: https://tinyurl.com/y99bn9gm
Product name Product category
Everything But the Bagel Seasoning blend
Goddess Dressing Salad dressing
Inner Peas Baked green pea snack
Joe’s O’s Whole grain oats
Just a Handful of Simply Almonds, Cashews & Cranberries Trek mix (nuts)
Organic Midnight Moo Chocolate flavored syrup
Reduced Guilt Mac & Cheese Macaroni and cheese
This Fig Walks Into a Bar Cereal bar
Trader Joe’s Raises the Bar Granola bar
Unexpected Cheddar Cheese Cheddar cheese
When Life Gives You Lemons… Add Mint & Ginger Green tea blend
Table 1: Unusual Trader Joe’s product names

9. An Experiential Discount Retailer Conquers the Culinary Seas
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3.3. Value
While offering exotic food items which would fit a specialty grocery retailer such as
Whole Foods Market, Trader Joe’s is clearly positioned as a discount grocer. Compared to
“hard discounters” such as Aldi or Dollar Tree, its prices tend to be slightly higher, but they
are on par with discount stores such as Wal-Mart.
Several factors contribute to Trader Joe’s ability to offer specialty products at discount
prices:
 Trader Joe’s buys its products directly from the manufacturers and the vast
majority of its products are private labels.
 Rent is a major cost factor in retailing, and Trader Joe’s benefits from the small
size of its stores. Furthermore, it saves money by having relatively small
parking lots (a practice which, however, leads to customer complaints as well).
 While located in affluent communities, Trader Joe’s selects inexpensive retail
locations within these communities, for example strip malls in close proximity
to prime retail locations.
Trader Joe’s makes discount shopping feel appropriate. Discount stores, particularly in
the United States, often feel depressing. They are cheerless and sterile at best and unkempt
and disorganized at worst. They make shoppers feel poor, uncared for, and looked down
upon. Trader Joe’s is different. While it is positioned as a discount store and its prices are
on par with other grocery discounters, it makes the shoppers feel affluent and sophisticated.
It does not have the social stigmata of a shop for the poor. Shoppers from different walks
of life can feel accepted here. Its store design manages to convey a certain worldliness and
lighthearted sophistication without interfering with the low-price image of the store. Trader
Joe’s even makes fun of its discount prices. For years it has been selling its inexpensive store
brand of Charles Shaw wines. Alluding to its low price in a tongue-in-cheek manner, the
company refers to it as 2-Bucks-Chuck.
3.4. Customer service
Trader Joe’s staff are genuinely friendly. At Trader Joe’s, shoppers get the impression
that staff members like their jobs and the customers. They are easy to talk to, knowledgeable
and genuinely enthusiastic about their products. Ultimately, they are the ones who make
discount shopping in this quirky store a fun and memorable experience.
Trader Joe’s prevents employee burnout by capping the amount of time sales associates
spend on particular jobs. At any time, one staff member is assigned whose task is to greet
customers, chat with them and answer their questions. This job is limited to one hour at a
time. Staff members work at checkout, another vital customer touch point, for a maximum
of two hours at a time.
Additional management practices that foster employee motivation and ultimately
customer satisfaction include the following:

10. Trader Joe’s
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 In its recruitment and employee selection practices, Trader Joe’s focuses on
hiring outgoing, people-oriented staff members. Already on the employment
form, prospective staff members are informed that an essential part of their
job is to engage customers by “greeting them, making eye contact, smiling,
and saying hello,” by “enthusiastically helping customers find items” and by
“sharing their product knowledge and enthusiasm.”
 Staff members are paid salaries well above the industry average. According to
an article in the Harvard Business Review, in 2012 full-time employees
received a starting wage between $40,000 and $60,000, which is substantially
higher than the remuneration at many other supermarkets.
 Staff members are encouraged to be generalists rather than specialists. This
ensures that they can quickly respond to non-routine situations and customer
requests. In addition, this practice reduces repetition and fatigue and therefore
has a positive effect on employee motivation. Personal initiative is valued.
According to the employment form, staff members are expected to “discover
ways to improve processes.”
4. The future: Challenges and opportunities
By many measures, Trader Joe’s has been a highly successful company. There are,
however, challenges that the company will have to address in order to maintain its success
moving forward:
 Other grocery retailers have started to imitate Trader Joe’s concept of smaller
stores. Tesco, a British company, experimented with small Fresh & Easy
neighborhood stores but in 2013 withdrew from the American market.
Another key industry player has been more successful: Wal-Mart, the world’s
largest retailer, is primarily known for its large hypermarkets and supercenters.
Since the late 1980s, the company has, however, established smaller
Neighborhood Markets (average size: 42,000 square feet) to complement its
larger formats. As of January 2018, there are 701 Neighborhood Markets in
the U.S. Wal-Mart also experimented with even smaller stores but closed
them in 2016.
 Trader Joe’s has traditionally not invested much in technology. It only
installed retail scanners in 2001, long after other retailers had adopted the
technology. Similarly, it does not offer self-checkout stations, even though
there have been customer complaints about long waits because of the
popularity of the chain and the corresponding high store traffic.
 Another type of technology has the potential to disrupt the industry as well.
In 2018, Amazon launched its first Amazon Go convenience store.
Proprietary technology allows shoppers at the Amazon Go store to avoid
checkout altogether. After shoppers electronically identify themselves at the

11. An Experiential Discount Retailer Conquers the Culinary Seas
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entrance, sensors recognize which products were taken from the shelves by
them and at the end of the store visit, the total amount is charged to the
shopper’s Amazon account. Industry insiders expect Amazon to license this
technology to other retailers in the future.
 In 2017, Whole Foods Market was acquired by Amazon. Traditionally,
Whole Foods was known for its high prices, earning it the nickname “Whole
Paycheck” among consumers. Soon after the acquisition, Amazon announced
that it would gradually lower the prices charged at Whole Foods Market.
Amazon/Whole Foods follow an omnichannel retailing strategy which aims
to combine and integrate online and offline distribution channels. For
example, around Valentine’s Day 2018, Amazon Prime members received a
coupon with which they could purchase red roses at Whole Foods Market at
a considerable discount. Furthermore, Amazon now offers a credit card to
Prime members which entitles them to a 5% discount at Whole Foods
Market.
On the other hand, there are developments that could be beneficial for Trader Joe’s:
 A report on National Public Radio (NPR) indicates American consumers’
growing preference for smaller stores that provide individualized service to the
communities in which they are located: Independent bookstores, which were
severely decimated first by big box chain stores such as Barnes & Noble and
later by online retailers, are going through a resurgence. From 2009 until 2018,
the number of independent bookstores – which focus on the shopping
experience and the needs of their communities – has increased by about 40%.
 According to a comprehensive consumer survey reported in the trade
publication Progressive Grocer, organic food has become popular in the
United States. 49% of consumers now prefer to buy organic food when offered
by the grocery store.
 The same survey revealed that prepared foods have increased in popularity and
have become an alternative to eating out in restaurants. About one third of
American consumers state that they bought prepared meals from a grocery
store at least weekly in the past month.
Will Trader Joe’s live up to these challenges and retain its quirky and fun atmosphere as
it further expands and grows nationwide? Will it be able to adapt to the ever-changing tastes
of the American consumer? Only the future will tell.

12. References
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Trader Joe’s (2015): Trader Joe’s Crew Job Description. Available online at
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ISBN: 978-3-7089-1726-9 Reprint courtesy of Facultas
Shopper Marketing & Consumer Insight
www.marketmentor.org