Trader Joe's Formula For Success: Innovation, Customer Experience, & Culture

By Abby Sorensen, Editor

Doug Rauch took the Retail Solutions Providers Association (RSPA) RetailNOW 2016 stage Aug. 2 to detail how, while president of Trader Joe’s, grew the company from a nine-store chain to a nationally-acclaimed retail success story with more than 340 stores in 30 states. Here are my notes from his address:

• Rauch started his presentation with a message of “innovate or die.” He visualized his point with a slide showing 50 percent of Fortune 500 companies from the year 2000 have been replaced and 71 percent of Fortune 1,000 companies from 2003-2013 have been knocked off the list as well.
• Trader Joe’s started as a 7-Eleven knock off, but the company had a much larger vision. He emphasized, “Profit should not be the reason you exist.”
• “The only valid definition of a business purpose is to create and keep a customer.” Peter Drucker.
• Corporate graveyards of America are filled with names we know because they didn’t innovate, like the typewriter industry.
• “Even if you’re on the right track, you get run over if you just sit there.”
• Rauch talked about the importance of a “healthy paranoid” state of mind.
• How can you wrap your head around innovation? Ask yourself if it’s feasible, if it’s viable, and if it’s desirable.
• Chocolate Covered Caramel Popcorn and Ginger Granola were used to exemplify the raving fans Trader Joe’s has created. Rauch received a postcard from two customers traveling abroad for charity work telling him they didn’t miss running water or electricity, but they missed these Trader Joe’s products. The company found a way to ship a case of the granola to their remote location.
• Customers are hungry for personal interaction and information. Their stores are built with this in mind.
• Peter Drucker said, “Culture eats strategy for lunch.” Rauch said culture doesn’t event wait for lunch: it now eats strategy for breakfast. Strategy without culture is like an organ transplant to the wrong blood type.
• You can come up with all kinds of slogans, but that doesn’t create culture. Actions create culture, words do not create culture.
• If you want to create a culture that allows for innovation, you have to take risks. You have to accept failure will happen.
• Trader Joe’s is a company that failed its way to success. The risks taken were related to finding more information about their purpose. You wouldn’t take an accounting risk, for example, but a risk to gather data about your purpose is worthwhile.
• If you want to create trust with your customer, you had better make sure every decision you make is made with your customers in mind.
• Rauch shared a compelling story about a mother with two young children trying to buy groceries in Manhattan before a big snowstorm. When she got to the counter she realized she had left her wallet at home. The part-time cashier said he’d pay for her groceries and she could pay him back later, which she did that same day. The customer contacted Rauch to tell him how grateful she was. The part-time cashier later told Rauch he was grateful for being empowered to make a quick decision, without checking with management, because he could make the customer happy and avoid her being embarrassed. That was the moment Rauch realized they had created the right culture.

For more articles on RetailNOW 2016, July 31 to August 3, 2016, at the Gaylord Texan Resort and Convention Center in Grapevine, TX, and the Retail Solutions Providers Association (RSPA), go to www.BSMinfo.com/solution/InsideRSPA.