Hot on the heels of a rousingly successful first-ever AXS in Atlanta last week (thanks to all who attended!) came the news: Joe Coulombe, founder of Trader Joe’s, died February 28 at the age of 89.
It’s been decades since Trader Joe himself retired (1988), even longer since he sold the company to Aldi Nord (1979), but he remains a retailing legend to this day. His clarity of vision gave rise to what continues to be the leading U.S. grocery retailer in sales per square foot. If there were an objective measure of customer loyalty and zeal, TJ’s would top that chart as well. One of the most frequent subjects its customer service team fields is people lobbying to have a Trader Joe’s open in their area.
You need not be a Southern Californian, a wine buff, or a Hawaiian shirt fan to find TJ’s an appealing place to shop. Or to be impressed by the company’s ongoing success. At AXS, our discussions covered both the advanced technologies and customer-centric fundamentals that shape customer experiences today. In light of that scope, it’s particularly instructive to analyze what makes Trader Joe’s the compelling case study it is.
For too many businesses today, technology tools and digital channels seem to be the main priority, with customers themselves almost an afterthought. Trader Joe’s, from the founding principles defined by Joe Coulombe up to the present day, focuses first and foremost on customers. It’s a living thought experiment in evaluating whether technology and customer data collection are even necessary to build durable, profitable customer relationships. In the digital age, that is an essential, if counter-intuitive, question.
How can we learn from the shop that Joe built? What are those indelible features that have made Trader Joe’s a long-running success, throughout changes like acquisition, the founder’s retirement, industry strikes, continued expansion, and changing buyer expectations?
Here are my four key lessons from Joe Coulombe:
1. Understand Your Customers
Start by doing your research. Joe had experience in convenience retail before he started the business. Maybe it was the Stanford BA and MBA, but he also looked at a series of broader trends and anticipated the needs of his audience. The number of college graduates was rising. The 747 had just been introduced. People were traveling more, expanding their horizons, and coming home with a taste for foreign food and quality liquor. Years later, Joe would famously describe his customer base as “over educated and underpaid”. No matter the label, he understood what appealed to them. Cue the staff in Hawaiian shirts, nautical theme, and limited-run product lines. Along with your French cheese, Italian wine, strange new condiment, and health foods you could have a conversation on philosophy, current events, or local history with your checker at the register.
2. Elevate Your Employees
If today we’re obsessed with the question of how to build enduring company culture, Joe just did it. He hired employees who liked people, because he knew that if his employees were interacting with customers, they’d always know what customers liked and what they didn’t. They’d also serve them better. Long before Starbucks gained social street cred for its benefits, Trader Joe’s was paying competitive salaries with full benefits. To this day, the company promotes mainly from within. Company executives also work on the shop floor. No one is removed or insulated from interacting directly with customers on a regular basis. When it comes to understanding customers' needs—and sensing when or how they may be changing—everyone does. It’s part of the company’s DNA.
3. Use Technology as a Means, Not an End
Notably, Trader Joe’s does not collect any customer data. They have no loyalty card, no customer database, and don’t even ask for your ZIP code when you check out. They have a website, but do not sell online. Even the Fearless Flyers they send out (which still look much as they did in the 80’s and 90’s) are bulk mailed to people within close proximity of their stores. I’m not sure if they even have a mailing list. They did finally introduce a POS system in the early 2000’s. I suspect (but can’t confirm) that they’ve got a pretty streamlined supply chain and logistics system. The critical distinction here is that TJ’s has a LOT of quantitative data on its products. Including how many people complain that they’ve discontinued something that they loved. Or when something turns out to be a dud. When it comes to information about customers, however, that is direct, qualitative, and, in the best possible way, tribal knowledge.
The company has recently started using digital media as a way of engaging its customer, but not in a conventional way. Rather than trying to build an online community, say, TJ’s has been producing an “Inside Trader Joe’s” podcast. It's like the Mickey Mouse Club for grown-ups, with less singing. If you have feedback about stores or products, you can provide it online. You can just as easily call a store and talk to a person.
4. Never Stop Innovating and Adapting
For the apparent dearth of digital communication channels or customer data collection, Trader Joe’s is still one of the most prescient in identifying emerging trends and profiting from them. Whether it was identifying growing interest in frozen seafood, moving into fresh produce, introducing organic products, or reducing the amount of plastic packaging on its food, the company continues to innovate and change. It is continuosly seeking out and testing new products. In a 2010 interview, quoted in his LA Times obituary, Joe said this: “My successors at Trader Joe’s have taken a 30-store chain nationwide with remarkable adherence to the basic concepts we started out with. Though it’s certainly a different store than I left in 1989, I changed it so many times, I can’t argue with what they’ve done.”
There are industry observers who suggest that Trader Joe’s must eventually adapt to ecommerce and digital channels in order to survive. That may someday be true, but it’s worth noting that the biggest gorilla in the business, Amazon, has been the one to adapt first. It moved into brick and mortar stores through Whole Foods.
One thing is certain. Trader Joe’s is a business that has personality, from its corporate culture to individual stores and employees. Each one is itself, but part of a larger whole. Trader Joe’s is a business built for people. If the captains and crew members ever decide they need to move more fully online, I’m confident they’ll translate that personality into digital media as well.
Which brings me to my biggest lesson—and perhaps our biggest challenge as businesses: how can we improve our ability to interact with, engage, and unobtrusively observe our customers without being invasive, opaque, or disingenuous in doing so? We must continue to find ways of doing in digital channels what we are so innately good at in person as humans. We also need to recognize that it’s the qualitative insights, not just quantitative data, that are often the most important indicators of what’s next. And finally, there’s a whole lot of insight we can generate from the right data—we just have to know where to look for it, and not bother with the rest.