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Trader Joe's Strategy Born Of Desperation

There are lots of ways to demonstrate customer service. Trader Joe's excels at one of the basics: delivering unique products at reasonable prices. The chain, which has 280 stores in 23 states, has from its earliest days tried to bring unusual goods to a clientele ranging from gourmands to starving artists.

By limiting its stock to specialty products at low prices, Trader Joe's sells twice as much per square foot than other supermarkets. It racked up an impressive $6.5 billion in sales last year. The strategy was born of desperation. In 1967, Joseph Coulombe's chain of convenience stores in the Los Angeles area was struggling to compete against 7-Eleven. That's when the Stanford business school grad read that alcohol consumption rose with education levels.

Coulombe stocked his stores with what he says was the largest assortment of California wines at the time--17 brands. Then he watched them fly off the shelves, as a new demographic known as yuppies discovered his stores. As the 1970s came, Coulombe was among the first to turn Southern California shoppers onto treats such as brie, wild rice, Dijon mustard and Vermont maple syrup. Coulombe sold Trader Joe's in 1979 to German supermarket giant Aldi, which has kept many of the original strategies in place.

Read the whole story at Business Week »

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