Book Review: "Becoming Trader Joe"
I remember the “thanks for listening” commercials on KFAC in the 80s.
Lots of interesting info here. Joe Coulombe was a Stanford MBA and the book is primarily aimed at fellow entrepreneurs so there is a lot of technical talk that went right over my head. Some of the bits that stood out.
Who is the Trader Joe’s customer? Someone who is “overeducated and underpaid.” Coulombe located the first store on Arroyo Parkway in Pasadena, in what was then an industrial area, to cater to people from Caltech, Huntington Hospital, and the Huntington Library.
TJ’s grew out of a small chain of convenience stores called Pronto Market that copied the format of 7-11. TJ’s only has 1,500 products while the typical supermarket has 25,000.
During Coulombe’s tenure TJ's had three informal incarnations that guided how it did business: 1) “Good Time Charlie,” focused on a large selection of liquor, mainly wine, 2) “Whole Earth Harry,” focusing on health foods, 3) “Mac the Knife,” focused on “intensive buying.” GTC involved becoming an American market leader in wine and wine education of customers, a strategy that carried over to other foods like cheese. WHE coincided with the 70s fad for health foods and that reputation still continues today. People consider TJ’s “healthier” than most grocery stores but I don’t think that characterization is warranted.
Mac the Knife’s “intensive buying” strategy resulted in a process that’s unusual for the grocery industry for four reasons. First, the stores are small, so every cubic inch must generate money. If a product doesn’t sell, out it goes. Unlike most grocery stores, they don’t care about selling a complete product line or any “essentials.” Every product has to justify itself. Second, embrace “discontinuities.” Get the best product for the best price. If the vendor can no longer supply the product for the best price, that’s it, it’s gone. This is why TJ’s is infamous for things suddenly disappearing. Third, everything goes through TJ’s buyers. None of the vendors deal directly with the stores. Unlike other supermarkets, you’ll never see soda or potato chip rep stocking shelves. Which leads to the fourth consequence, a focus on private label as opposed to national brands.
A major theme of the book is the headache of dealing with government regulations at the federal, state, and local level. While Coulombe concedes that certain health regulations are necessary it’s not hard to discern that he has a libertarian attitude, at least towards business. (John Mackey, founder of Whole Foods, is also famously libertarian.) The California market deregulated during the 70s and 80s when it came to price controls on alcohol and milk, leading to a wave of consolidation as some companies were able to survive the change and others weren’t. I had always wondered why so many supermarket chains from my childhood no longer existed.
Coulombe said his single best business decision was paying his employees well, something another local institution, In-N-Out, is also known for. Partly it was selfish: he didn't want the workers to unionize, so he paid them well above minimum. His other anti-union tactic was making sure that all employees were interviewed multiple times a year to air any grievances. In his view, the primary reason employees unionized wasn’t for more pay, it was to be heard.
Buried at the end, Coulombe figures “half his time” was spent dealing with theft. Might be exaggerating, but he outlines how when you run a grocery store people are constantly stealing. Customer shoplifting is the least of it. He worried more about theft from store employees, vendors, buyers, and even people in the front office.
I knew he sold the company to Aldi, but I didn’t realize it happened in 1979, which means TJ’s has been under foreign ownership nearly all of my life. He was impressed by their German acumen and conservative business approach. Although numerous American firms had offered to buy him out over the years, he refused, because he figured an American company would ruin TJ’s. Joe insisted on a one-page sale contract, no bullshit.
TJ’s is an extension of Coulombe’s sensibility. The book is full of literary and historical references. The dude was well-read. All that cutesy-corny-smartypants branding that TJ’s is known for is sincere. He used the 19th-century illustrations in advertising, another TJ’s trademark, because it was royalty-free. As I mentioned here, TJ’s tropical decor is a vestige of the midcentury tiki craze.
I need to do more research on how much milk has been historically regulated in the U.S. In law school, I was surprised that so many of our constitutional law cases, which implicated interstate commerce, ultimately sprang from disputes over milk, eg. HP Hood v. DuMond, Dean Milk v. City of Madison, West Lynn Creamery v. MA, MN v. Clover Leaf Creamery, and Nebbia v. NY. The most famous footnote in American constitutional law, footnote 4 in US v. Carolene Products, also concerned milk regulation. Now I learn that milk deregulation was a major factor in the California supermarket sector during my lifetime. TJ’s used to sell raw milk but it hasn’t for years. Whole Foods used to sell raw milk but gave it up when Amazon took over. Need to look into all of this.
Which fans are more rabid: TJ’s or Publix? Gonna give the edge to Publix. TJ’s fandom + In-N-Out fandom = Publix fandom
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The first five episodes of its podcast, which comprise an introduction to its philosophy and business practices, are good.
This was all super-interesting. Thank you for reading and sharing! Trader Joe's was a small but notable part of my twenties, as I leaned into vegetarianism. I remember, in grad school, how I could eat well and relatively cheap through short visits to the Trader Joe's in Orange County.