A psychologist explains how Trader Joe's gets you to spend more money

  • Trader Joe’s has a cult-like following, thanks to the way the company seems to make grocery shopping easier.
  • Data science professionals have ranked Trader Joe’s number one in customer preference for two years running.
  • In 2017, Trader Joe’s made $US13.3 billion, yet the brand has no online store, no loyalty programs, and no sales.
  • When you break it down to square footage, Trader Joe’s is actually selling more than double its competitors like Whole Foods.

Following is a transcript of the video:

Narrator: OK, so imagine yourself at the grocery store. You’re hungry but you don’t really feel like cooking. I guess pasta’s pretty easy. Suddenly you’re faced with this. That’s so many choices. Do you go for the classic tomato basil? How ’bout creamy alfredo? But what exactly is the difference between these two or these three? Wait. Why is this so hard?

Trader Joe’s is the surfy, laid back grocery chain know for it’s cheap prices and floral print clad staff. Data science professionals have ranked it number one in customer preference for two years running. The brand has held off on going high tech. They keep it simple with no online store, no loyalty programs, and no sales. When you break it down to square footage, Trader Joe’s is actually selling more than double its competitors like Whole Foods. But how much money you spend at Trade Joe’s ultimately comes down to what you are choosing to buy. But what about Trader Joe’s makes it so easy to choose?

Barry Schwartz: I spent, I’ve spent the last 25 years studying how people make decisions.

Narrator: That’s Barry Schwartz, a psychologist, a professor, and a Trader Joe’s enthusiast himself.

Schwartz: I think Trader Joe’s is the best example of how the world should be constructed.

Narrator: Whoa, take it easy there Barry. Barry coined the term the paradox of choice and quite literally wrote the book on it and it basically describes how you would think that the more–

Schwartz: Choice we have, the better off we are. That turns out empirically not to be true. When you give people too many options, they get paralysed instead of liberated.

Narrator: The store has always focused on a unique selection of products rather than a large amount of them. I wanted to find out if there was choice-limiting going on at Trader Joe’s. So I went to my local market to count some things. I counted 144 pasta sauces, 44 olive oils, and 172 cereals. That’s a lot of choices. So then I went to Trader Joe’s. And they had an approachable 14 pasta sauces to choose from. Same goes for olive oils, canned beans, and cereals. At Trader Joe’s, there’s simply less to choose from. So then I asked Barry if he thought Trader Joe’s perhaps had inklings of the paradox of choice in mind when designing their shopping experience.

Schwartz: I think it’s completely inadvertence.

Narrator: Well then what exactly would explain why Trader Joe’s practices a scaled down approach to shopping?

Schwartz: They probably did it as a way of controlling costs. Managing inventory, you know, simplifying the supply chain. And somebody thought that if you offered other kinds of value, people would be willing to forgo options. You can’t have everything but anything we’ve got is worth having and we make your life simpler.

Narrator: In fact, when you look at Trader Joe’s humble beginnings, the original Joe, Joe Coulombe, founded the business on quality over quantity. Trader Joe’s made $US13.3 billion in 2017 a number that’s likely going up. The core of any business is the customer service which Trader Joe’s excels at. The employees, or crew members as they’re called, are all extremely attentive and helpful. In short, they’re there to make your life easier.

This ideology is embodied in their food as well specifically their frozen food. And Americans have always had a certain affection for a heat-and-serve mentality. Frozen dinners are easy, fast, and little mess. However, about half the time, the frozen section aisle remains pretty empty.

According to Phil Lempert, a supermarket analyst, this is due to the frosty barrier of the freezer section. Opening that icy cold door likely means you’ve already committed to purchasing something which doesn’t tend to lead to much product discovery. Compare that to Trader Joe’s open freezer bins and you can start to see the difference. There’s no glass door and the low level of freezers bring shoppers physically closer to the products. It allows the freedom to check out the packaging more leisurely and without the blast of cold air.

So tons of effort being put forward to get customers to the product, the products themselves have to be good, right? Trader Joe’s products are marketed as healthy and the products aren’t the same old things we usually see in grocery stores. No Lay’s, no Heinz and it’s mostly Trader Joe’s own private label. They buy straight from the supplier which ultimately cuts costs and leads to cheaper products on the shelves.

The products themselves are colourful, quirky, and have a consistent branding. To find out a little bit more about the effects of good branding, I called Denise Lee Yohn who is a brand building expert. And I wanted to know more about what goes into the packaging design.

Denise Lee Yohn: OK, so it’s usually kind of hand-drawn or it’s not looking like it’s computer generated, right? There are usually caricatures and then there’s some descriptive copy. And all of that I think helps the person, the shopper, kind of see how this product fits into their need. There’s an element of discovery, like finding a new product you didn’t know existing.

Narrator: In an interview, the former head of packaging design at Trader Joe’s said that the hand-drawn aesthetic invokes feelings of the human touch and artisanal quality. It can be easy to opt for takeout when thinking about stepping into the grocery store after a long day. But the subtle combination of tactics employed by Trader Joe’s makes shopping a legitimately enjoyable experience. It gets you excited about something uniquely human, cooking and eating your food.

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