If you have a TJ’s in your area, chances are you love it. But how did this small sized grocery chain with no brand name goods lay waste to the Big Guys??
Institution Enterprises |Business Development Folsom
The Short Version:
- The supermarket industry is ultra competitive and difficult, with margins so thin they make supermodels blush.
- Even though it is small, TJ’s out performs Amazon’s Whole Foods by almost QUADRUPLE when it comes to sales-per-person hours!
- TJ’s uses a unique model of cost cutting and saving, along with an enviable old-school customer service approach to turn the industry on its head.
It is hard to make your business stand out in the crowd. It is even harder to stand out in the crowd and be successful. The quirky SoCal inspired grocery chain, Trader Joe’s, has been slowly writing the book on “outside-the-box” when it comes to strategic business development.
Starting out in Southern California in 1958 as Pronto Markets, Trader Joe’s has slowly and methodically crept its way into supermarket stardom using an unconventional approach to the industry. TJ’s has essentially been flying under the radar for the last 60 years, while big name markets like Safeway, Whole Foods, and Kroger’s have been front and center.
As TJ’s began to grow across the country, so did a certain mystique to it. Sort of a neighborhood secret, with a rabid fan base, eager to ask each other and share stories about exclusive, TJ’s-only foods.
Business Development Superstar
While still modest in size compared to the big names, Joe’s has captured the hearts and minds of its customers. TJ’s won the prestigious dunnhumby Retailer Preference Index in 2018 and 2019, over big names like Amazon, Costco, and Walmart. They finally fell to 2nd place in 2020. This award looks at a combination of customer satisfaction/preference along with financial performance to determine a winner. To earn a top-3 spot validates a business development strategy, and to win it two years in a row is just plain special.
What Are They Doing So Right?
If nothing about TJ’s is orthodox, then it really begs the question: “What are they doing right?”. Basically all of their non-conventional methods are what is making them successful. At the heart of it all is cost savings while creating value, and customer relationships. Let’s take a look at a few of their strategic choices.
Small stores, small strip malls
While the big name markets typically serve as massive anchors to town-center strip malls, TJ’s can be found tucked away in smaller, older, just-a-little-bit-out-of-the-way strip malls. The average grocery store is approximately 40-50,000 square feet, while TJ’s averages less than 15,000. This benefits TJ’s in several ways:
- smaller brick and mortar equals cheaper rent
- older, smaller location equals cheaper rent
- smaller retail space equals cheaper labor cost
- smaller retail space and fewer skus (items) equals cheaper inventory cost
See the pattern? Bigger isn’t always better, and it’s almost always more expensive. Lower overhead, and “smaller” also allows for rapid adaptation and pivoting to meet your customers’ ever changing preferences.
Value, value, value
Saving money up front like this allows TJ’s to lower their price points compared to their competitors. However, don’t you dare confuse them with budget friendly Walmart who just undercuts everyone by way of volume. TJ’s creates value not just in price, but in product, by primarily carrying their own brand for most products. Their line is original, exclusive, and very high quality. Essentially this means you get to buy a Mercedes on a KIA budget.
A different kind of customer service
Another major component of their success is the way they approach customer service/management. Today’s retail world is largely driven by customer data. Look at Facebook and all the trouble they got into with their data. Google is creepy in how much it knows about our preferences. Meanwhile, here is Trader Joe’s, not collecting a single piece of customer data.
Well, at least not the way its being done today. Trader Joe’s does it “old-school”, meaning, they talk to you. They talk, they listen, and they learn. They also are very good at remembering. TJ’s invests heavily in their staff, creating a sense of community and loyalty, which carries over to the customers. They also invest heavily in making the staff experts on products. This allows for staff to answer questions beyond just “where can I find…”, and gives them a way to engage with customers on multiple levels.
TJ’s is also big on samples. Think Costco, but even more! This serves multiple purposes: it allows them to get their brand out there, and it allows the customer to feel some sense of ownership in the whole TJ’s experience. You can pretty much sample anything you want. They sincerely want you to love what you buy.
How Can You Take Your Business Development to New Levels?
Look, we often reference business success stories that are outside the box (check out our fast food world domination article). That is not to say that you have to reinvent the wheel to be successful, just that there are other ways than status quo.
The TJ’s model will be replicated and copied by competitors. 100% guaranteed. While it is fairly easy to follow their pricing-cost model, it is not as easy building the culture they have. The TJ’s culture is not just in-house, but most importantly, with their customers. Just look at social media if you want to understand. TJ’s puts little to no effort into social media, but there are countless pages devoted to TJ’s specials, recipes, and foods, ran by loyal customers. This is their strategic advantage, and the true secret to their success. Customers. Never lose sight of them.
Want help designing your business development strategy? Reach out. Our motto is “with you, not for you”, because we believe the best way to help you is by helping you learn how to do it yourself (like training wheels, we help make sure you do it right).
“We do it with you, not for you”
Institution Enterprises is a Sacramento marketing firm that provides a new standard in business consulting and education, helping your start-up or seasoned business design the practices and customs for success in today’s marketplace.
Institution Enterprises |Business Development Folsom