Trader Joe's Excels by Being Low-Tech and Limiting Consumer Choice

As more and more grocery store chains get sucked into a digital transformation arms race of investing in digital shelving systems, on-demand delivery services and cashier-less payments, Trader Joe’s continues to outsell competitors like Whole Foods more than twofold by doing none of those things.

Known for its cheap prices and Hawaiian shirt-wearing staff (who are known as “crewmembers”), the grocer offers no online store, no loyalty program and no sales promotions. And yet, it sells more per square foot than its top competitor, the Amazon-acquired Whole Foods, and data science professionals have ranked the brand number one in customer preference for two years running.

The key part of Trader Joe’s stripped-down approach is how few items it stocks, and the fact that you won’t find household names like Heinz, Lays or Coca-Cola, which are no-brainer staples at most national chain stores. Instead, Trader Joe’s almost exclusively stocks own-brand items made by its private label - and they’re limited in scope.

It’s approach to customer service is equally pared down - you either call the store you want to reach directly or stop by, or call – no omnichannel CS here. “While we always recommend a face-to-face conversation, we’re also just a phone call away,” reads the copy in the Trader Joe’s ‘Contact Us’ section, followed by a link to a PDF listing store locations and phone numbers. It’s adorably quaint.

Doing more with less

In a recent analysis by Business Insider, reporter Jack Houston counted the number of items on display at his neighborhood grocer. He tallied up 144 pasta sauces, 44 olive oils and 172 cereals. Meanwhile, the nearby Trader Joe’s stocked just 14 pasta sauces, 14 olive oils and 39 cereals.

While it’s uncertain whether the notoriously secretive company limits choice on purpose, psychologist Barry Schwartz says that reducing choice not only simplifies the shopping experience, but reduces the stress of selecting from an overwhelming array of largely homogenous products, such Prego’s marinara versus Newman’s Own.

“You would think the more choice we have the better off we are, but that turns out to be empirically not true,” Schwartz told Business Insider. “When you give people too many options they get paralyzed instead of liberated.”

Schwartz calls this the “paradox of choice.” He became so transfixed by the concept, which runs counter to every economic theory on maximizing utility as well as the prevailing retail dogma that more choices make happier customers, that he wrote a book with an eponymous title - Paradox of Choice: Why More Is Less.

However, Trader Joe’s tightly curated product lines aren’t necessarily informed by advanced consumer psychology. Rather, it’s a way of controlling costs, managing inventory and simplifying the supply chain. By producing own-brand goods, Trader Joe’s buys directly from the supplier, which drives prices down. Moreover, many grocery stores charge brands for being displayed on their shelves, which often results in higher prices.

In a TED talk on the paradox of choice, Schwartz recalled a recent stress-inducing trip to a department store to buy a new pair of jeans. Asked whether he’d prefer slim fit, easy fit, relaxed, stone-washed, acid-washed, boot cut or tapered, he countered wearily: “I want the kind that used to be the only kind.”

Schwartz also noted that the proliferation of choice creates a false sense of opportunity cost, where we start to ponder what else we could have bought instead, and consequently feel less satisfied with our purchase, even if it was a good one. We also blame ourselves for the discontent.  

“One consequence of buying a bad-fitting pair of jeans when there is only one kind to buy is that when you are dissatisfied and you ask why, who's responsible, the answer is clear: the world is responsible. What could you do? When there are hundreds of different styles of jeans available and you buy one that is disappointing and you ask why, who's responsible, it is equally clear that the answer to the question is: you.”

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