Amazon's acquisition of Whole Foods has rattled the grocery industry. Already, price adjustments have taken effect, with Whole Foods slashing the price of store staples like avocados, coconut water, and farmed salmon. Shoppers are rejoicing, celebrating what seems to be the end of the company's "whole paycheck" epithet.
But, while many experts expect the bombshell $13.7 billion acquisition to put Amazon on the key path to gaining supremacy in the "grocery wars," there's an underdog that may prove victorious.
A shopping trip to Trader Joe's has become a Saturday morning ritual for me. I have my coveted staples, like Joe-Joe's Cookies and Speculoos Cookie Butter, and never fail to pick up some new seasonal offerings, like Trader Joe's Organic Pumpkin Spice Granola Bark. In case you've been living under a rock (or don't live near a Starbucks), pumpkin season has arrived.
This morning, I could just as easily have ventured in an opposite direction to my neighborhood Whole Foods. Instead, I opted for Trader Joe's. And it seems I'm not alone. Consumers young and old consistently give Trader Joe's top marks against Whole Foods. Why these accolades?
1. Limited Offerings
In 1995, Columbia University professor Sheena Iyengar performed an experiment that involved exposing shoppers to displays of jams, ranging in number from six to 24 different varieties. When presented with only six jam options, consumers were more likely to make a purchase, compared to when they were presented with 24 options. Why? When we're presented with more options, we tend to question ourselves. Our cognitive load increases, with the result that we feel overwhelmed and are less likely to make any decision at all.
Trader Joe's minimizes the cognitive load associated with a typical grocery shopping experience. The chain carries only about 4,000 products (typical grocers stock roughly 50,000 products). And 80 percent of products don the Trader Joe's private label. This morning I might have been stymied by the 10-plus varieties of almond butter stocked by my neighborhood Whole Foods. Instead, I was quick to select Trader Joe's tried and true Raw Creamy Almond Butter.
Not only does Trader Joe's offer less product, it also limits options according to season. Loyal shoppers attest to eagerly awaiting Trader Joe's "Fearless Flyer" to keep in the know about when their favorite products will return to shelves. With its seasonal offerings, Trader Joe's strategically leverages the power of scarcity, one of Robert Cialdini's six influence tactics. Scarcity is based on the notion that humans feel taxed emotionally when they believe their freedom has been infringed upon. If consumers think their coveted boxes of Candy Cane Joe-Joe's won't be available next month, they're more likely to buy today. Trader Joe's website explains:
[Candy Cane Joe Joe's are] a holiday-only item. We know there are those of you who'd like to find them every time you shop at Trader Joe's. We sympathize. But we also know exactly how happy you are when the holiday season rolls around and you encounter your first box of the season. It's your joy, ultimately, that convinces us to offer these only seasonally.
The fear of missing out is powerful--and something you're unlikely to experience at a grocer now owned by the Everything Store.
2. First-Rate Customer Service
Contrary to popular belief, first-rate customer service is becoming more--not less--important. Roughly 40 percent of customers decide to purchase from a competitor due to a reputation for superior customer service.
As I meandered through Trader Joe's this morning, I couldn't help but notice the ambience. There was no PA system distracting me as I sampled Trader Joe's new Organic Nicaragua Coffee. Instead, I heard periodic ringing of bells. The nautical-like bells are part of a highly strategic Morse code-like system. One bell signifies to the "crew" the need to open another register, whereas three bells commands a manager to action. The system makes for a more enjoyable consumer experience. The company's website explains, "Those blustery PA systems just didn't feel right to us, so we came up with a simple system to communicate." The bells are not only less encumbering than the typical PA systems you find at Whole Foods and its grocery brethren, they also increase efficiency by immediately alerting workers as to specific needs. They help explain why Trader Joe's sells twice as much per square foot as Whole Foods.
Customer service is further enhanced by a generous return policy. Customers can purchase anything and, if unsatisfied, return it for a full refund. I'm much more likely to experience a series of questions and a snide glance or two--or even an outright "no"--if I attempt to return a grocery item to any other grocer. Trader Joe's policy cleverly leads to increased spending and impulse buying because it minimizes the chances of feeling buyer's remorse.
In contrast to Amazon and Whole Foods, Trader Joe's is bereft of a mammoth marketing budget. Instead of spending millions of dollars on advertisements, Trader Joe's casts its products using a medium that humans are hardwired to enjoy--storytelling. Consider the company's description of its Quiche Lorraine:
While we already sell a variety of frozen quiche, we've yet to provide our customers with the classic from Lorraine, France. The reason for our delay has had to do with...ham. You see, Quiche Lorraine must not only have a perfectly flaky, buttery crust--it must also have plenty of ham.... After a diligent search, our developers finally found the right supplier in San Francisco.
Contrast this with Whole Food's description of its Quiche Lorraine:
Start the day with style! Our Lorraine quiche features bacon and cheese with silken custard in a flaky pastry shell.
Instead of relying on generic labeling and ingredient lists, Trader Joe's brings its products to life, even giving shoppers suggestions in terms of how to enjoy the product:
Serve it for breakfast with fresh fruit, or for lunch with fresh greens. It feeds four, unless you cut it into smaller pieces and serve it as an hors d'oeuvre. So versatile! So quiche-able.
Research shows that consumers primarily use emotions as opposed to features and facts when evaluating brands. For Trader Joe's, it's all about giving a life and voice to its products and this gives it a key advantage.
Though many have written off Trader Joe's as a viable contender in the grocery store wars, I wouldn't be surprised if we see the unfolding of a David and Goliath tale. Whole Foods will need to take a page or two from Trader Joe's "Fearless Flyer" if it hopes to reign superior and whet the appetites of the masses.