I’m a regular shopper at Trader Joe’s. If I’m making a big taco spread for a hungry group of family and friends at home, TJ’s will have everything I need (the pickeled jalepeño peppers as especially good). 

The origin story of Trader Joe’s is a great one, so let’s take a look at it and discuss the lessons that entrepreneurs everywhere can learn. 

The founder was Joe Coulombe. After graduating from Stanford in 1958, he went to work for Rexall, the largest retail pharmacy chain at the time. Rexall gave him the task of developing a new line of convenience stores in Southern California.

He successfully got six Pronto Markets up and running before the Rexall 

corporate bigwigs back at headquarters changed their minds and told him to shut the stores down. But he didn’t want to, so instead he borrowed money, bought them himself, and transformed his career from a corporate lackey into being a determined entrepreneur.

Coulombe grew his Pronto Markets to eighteen locations around the Los Angeles area and was doing great until 7-Eleven, the Dallas-based convenience store giant, announced they were entering the Los Angeles market.

 “They were so huge, I decided I’d better get the hell out of convenience-store retailing,” he recalled later. Rather than try to compete head-to-head with 7-Eleven, he came up with a new name, revamped his stores, and (in an era of unironic Tiki culture) gave them a South Seas motif with an eclectic set of products. 

Boeing was about to launch the 747 jetliner, and suddenly international travel would be available to millions of Americans. Coulombe predicted this would increase consumers’ interest in exotic foods and what today we would call “ethnic cuisine.” Instead of carrying the same boring American food found in most grocery stores, he focused on a mix of interesting tastes from around the world. Nailing that particular consumer trend would turn out to be a key component to his success.

“What you want is a coherent group of customers,” Coulombe told Investor’s Business Daily in 1998, “and you shape yourself around it.” I think those words should be memorized by every entrepreneur—identify a coherent group of customers and then build your product offering around them. In 1960s America, more people than ever were college-educated, and Coulombe was based in Southern California where many of them landed to vie for jobs in the entertainment industry. He said he envisioned his new stores as havens envisioned his new stores as havens “for overeducated and underpaid people, for all the screenwriters, classical musicians, museum curators, and journalists.” Bingo—he identified and described a target market he could build a product offering around.

Most chains have identical retail spaces no matter the location. The interior of a 7-Eleven in Chicago is identical to the interior of a 7-Eleven in Atlanta, for example. Coulombe knew that he needed the scale economies of a chain, but he wanted consumers to feel as if their neighborhood stores were connected to their communities. Trader Joe’s hired in-house artists who matched each store’s decor to the neighborhood it served. To this day, they create signature wall murals (the Manhattan store has a rainbow Statue of Liberty, while the Santa Cruz store has surfers, for example), and the same in-house artists create all the signs and labels in each unique store. Customers like the benefits of a big chain, but they also like supporting businesses that feel integrated into their communities.

Over time, Coulombe added more organic and healthy items, because that’s what his “overeducated and underpaid” consumers were asking for. In 2007, Trader Joe’s phased out food imported from China due to customer concerns. They discontinued sales of six species of fish deemed unsustainable by Greenpeace, and today they only carry dairy products without added hormones. Their shelves are stocked with items containing no artificial colors, flavors, preservatives, or genetically modified ingredients. In recent years, they’ve been criticized for their use of plastic packaging, which they are now phasing out. From the beginning, Coulombe had managers dressed in tropical shirts standing behind the front desk, asking customers what they liked, what they didn’t like, and what they wanted to see more of. 

Coulombe consistently listened and responded accordingly.

No discussion of Trader Joe’s would be complete without mentioning the wine section (my favorite part!). When Coulombe founded Trader Joe’s, a typical grocery store might have one percent of their shelf space dedicated to wine; Trader Joe’s devotes nearly fifteen percent of their retail space to that one product category. Coulombe was a wine lover himself, and he once said he had read that “educated people tended to drink more wine,” so that fit his vision of the customers he was targeting. In the 1960s, most consumers thought of fine wine as expensive and imported from France, but the California wine industry was just getting going, so he decided he’d focus on value wines, largely from California. Soon after came the famous Two-Buck Chuck, a private-label California wine exclusive to Trader Joe’s that sold for its eponymous price. Consumers were being introduced to Trader Joe’s variety of goods via their wine selection—they would come in for the wine and discover that the store sold food, too!

Today, Trader Joe’s is owned by a guy in Germany, but it is still run on the principles established by its founder, Joe Coulombe, many years ago.

The story of Trader Joe’s is a great parable of entrepreneurial success. A guy quits his corporate job, creates a new startup, dodges well-financed competition, listens to customers, gains millions of loyal followers, drinks a lot of good wine, and becomes a cultural icon. Sounds like a life-well-lived to me. Here’s to Joe Coulombe, and to “overeducated and underpaid” people everywhere.

Key Takeaways:

• The way Coulombe indentified a “coherent group of customers” and built a product offering around them is important to note. In Chapter 2 we will discuss how successful product development begins by talking to customers, and in Chapter 7 we will discuss the idea of creating Customer Personas and referring to them constantly. You can’t build a product “for everyone”.  You  have to have a very specific set of personas you are building a product offerring about, and Joe Coulombe did that.

• Competition didn’t scare Coulombe off, but it did make him realize that positioning within the landscape mattered. So he built an offering that was clearly positioned as something that was different than convenience stores and traditional grocery stores.

• Never stop iterating. By continuing to talk to customers (and have his managers do the same) he was able to stay on top of consumer trends as they shifted and he made sure that the product offerings in his stores shifted as well.