In 2006, near the height of the nation’s recent real estate bubble, Trader Joe’s opened its first store in Manhattan near Union Square, where it would compete in a symbiotic foodie arena that included the big city’s most active greenmarket, a three-story Whole Foods location, and local chains Balducci’s and Garden of Eden. Area bloggers rejoiced. How could the Monrovia, Calif.-based chain not soon take over New York? Hundreds of fans were waiting outside in Hawaiian shirts prior to the store’s opening!
But slow and steady wins the race for Trader Joe’s Chairman and Chief Executive Officer Dan Bane. The Union Square location is still open and by the looks of it, doing very well. So is a location in the isolated, slowly gentrifying waterside neighborhood of Red Hook, Brooklyn, and another, in a decidedly unglamorous part of Rego Park, Queens, a couple of blocks from a large cemetery on one side and the relatively wealthy neighborhood of Forest Hills on the other.
Trader Joe’s is not conquering New York in the way the company’s most ardent fans had hoped. It opened its second store on the island of Manhattan earlier this month, more than four years after its initial debut. But Bane and his chain have always tended toward caution in matters of expansion and real estate.
This abundance of caution looks unusual for an innovative, successful retailer that never seemed to have any qualms about opening stores adjacent to Whole Foods and other supermarkets in aging California strip malls. Consultants and analysts consistently point to them as an example of retailing and branding at its finest. Last summer, for example, Trader Joe’s was the only food retailer to appear on Landor Associates’ list of Breakaway Brands from 2005 through 2009, along with companies such as Apple and Google.
“Each [brand] has taken the initiative to stretch into new messaging, markets and/or audiences by building on their core brand strengths and committing to a sustained, business-building idea,” Hayes Roth, chief marketing officer of Landor Associates, said of the list.
But Bane’s strategy of slow expansion, typically seeking out below-market leases for compact stores to sell exciting private-label foods, looks pretty smart given what has transpired in U.S. commercial real estate since that first Manhattan store opened in 2006.
That caution does also give competitors plenty of room to maneuver, and imitators could present an emerging threat. For example, in May, Trader Joe’s sent a cease and desist letter to H.E. Butt Grocery Co., demanding that they change the name of their new “Joe V’s Smart Shop,” a new limited assortment discount format. As quiet as the chain has always been, it’s been awhile since it could fly under the radar, and if larger retailers begin coveting Trader Joe’s space in the market, it could eventually pose some challenges to the chain.
Fortunately for Trader Joe’s, its strategy has long been to build the company around excellent employees. The company screens well, hires with an eye toward enthusiastic customer service and adaptability, pays generously and promotes from within. And that will always be a very tough strategy to imitate.
