Why Analog Trader Joe's Excels in an Omnichannel World

John Lucot spent 42 years at Giant Eagle—starting as a clerk in 1974 and ending with his retirement as the chain's president and chief operating officer in 2016—before joining e-commerce engagement specialist Mercatus as senior strategic adviser this month. 

After Walmart and Target released better-than-expected quarterly earnings this week, with continued strong growth in e-commerce even as consumers flock back to stores, Winsight Grocery Business checked in with Lucot to get his take on how grocery retail is likely to continue to evolve the rest of the year.

Christine LaFave Grace: Against a backdrop of growing in-store traffic, grocery retailers are emphasizing that they're committed to making their e-commerce order fulfillment more efficient and improving the online shopping experience for customers. How and where do you see consumers' online-shopping expectations continuing to evolve?

John Lucot: I think they’re going to grow. It’s just too easy. Who really wants to get into their car, go through a large store, haul around their Tide and their water, their pet food? We got to simulate this on a mass basis through the pandemic, and [online] is just too easy.

The first two categories that left the supermarket and went online were baby and pet. Baby makes all the sense in the world—the last thing you want to do is run out of diapers, wipes and formula. So how do you countermeasure that? I just have a regular order that’s going to show up at whatever pitch you want it. It’s the same with pet. They were the precursors.

Supermarkets are still trying to recover from that—I don’t think there is a recovery. I think [supermarkets] are going to become more convenience and fill-in than primary. I think perishables, along with the service and education, the expertise that you’re willing to invest in in the stores and assortment categories—and the ones I’d be focusing on are natural, specialty and international foods that people generally aren’t aware of and want to be romanced by; they want to be educated about it—stores, maybe you have nutritionists available for people. That’s how those brick-and-mortar guys are going to have to change if they’re going to be successful long-term.

Is that what allows Trader Joe’s to be an outlier? Without an e-commerce presence at a time when everyone’s talking omnichannel, Trader Joe’s this spring had the University of Michigan's highest customer satisfaction score of any major retailer.

I think Trader Joe’s is a treasure hunt. I think it’s a real fun experience to go into Trader Joe’s. Talk about own brands—it’s own brands are on steroids in those stores. Their seasonal approaches, their innovation. ... Trader Joe’s is cool; it's fun; and you find things that you won’t find elsewhere. As human beings, we still need to be romanced, we still need to socialize—those kinds of things.

I have a Trader Joe’s by my house here in Pittsburgh, and it’s up against the highest-flying Giant Eagle in the chain, which does really big volume. And it took a chunk out of the store. And that’s the thing—when you go online, I think the guys who are going to innovate, build algorithms and things like that based on buying propensities to try and offer you something that you might think is cool—it's similar to how you might navigate through a Trader Joe’s. It feels like you’re walking through a story as you’re walking through one of their stores.

What are some of the indicators you’re going to be looking at to get a better sense of where things are headed through the rest of 2021?

I’ll be interested in what’s happening with sales against the backdrop of the pandemic, how those comparables will look, and where the growth or lack of growth is occurring. What’s happening to the assortment?

I think the good guys will be adding new categories. If they’re really astute, they should be adding new categories to the stores. I’ll give you an example: home office and school supplies. Supermarkets basically gave those up to Staples and whomever. But now that people are working more remotely and the kids are maybe in school, maybe not, there are certain items within the category that you should have for an impulse buy. I think health, beauty and wellness is a key plank for these guys, if they really are willing to innovate and change. If I go to the mall, the busiest store in the mall obviously is Apple, but the second busiest store is Sephora.

So I would be looking for where the innovation is coming from in added assortment, how they step up for home meal replacement, maybe on-premise consumption but certainly off-premise consumption—how they’re stepping up their game in those areas.

I think it’s going to be very, very interesting to see who does what and how they do it.