Isegoria

Although the privately held company won’t admit it, Trader Joe’s was founded by Joe Coulombe 44 years ago:

When Coulombe left San Diego and arrived at Stanford in 1949, he knew two cuisines: His paternal grandmother’s New England boiled dinner and his mother’s take on the diet of Tennessee, where her people were from. “I would call that ‘Southern suicide cuisine,’?” says Coulombe. “It was a lot of bacon fat poured on greens.” At a mixer he met a girl named Alice Steere, whose father was a Stanford professor, and at the Steeres’ table was served foods he’d never encountered: Dungeness crab and sourdough bread, steamed artichokes, jug wine, olive oil. “Think of it,” says Coulombe. “I’d never even seen olive oil.” He earned an MBA at Stanford, which, according to Coulombe, was then a near-worthless piece of parchment. “The degree was new,” he says, “and corporations couldn’t make sense of it.” Palo Alto was a different town. There was no venture capital, no training for entrepreneurs. Coulombe — a risk-taker at heart — tested for a job at General Electric but was told his psychological profile made him a bad fit at the regimented company. It was 1954, and his options, he says, “were none.”

Eventually Coulombe was hired by Owl Rexall and asked to come up with a store that could help stanch the company’s losses. By the 1950s, supermarkets had begun stocking health and beauty aids, killing the profits of drugstores like Rexall. The Stanford grad thought small: Sav-On had combined the drugstore with the supermarket, so Coulombe bred the drugstore with the convenience store and came up with Pronto. Just six Prontos were built in L.A. before Justin Dart, Rexall’s president, went against the unanimous protest from his board and acquired a company called Tupperware. Instantly Tupperware outperformed Rexall, and Coulombe received orders to liquidate Pronto. Instead he left Rexall, buying the Prontos on his way out the door. In the span of several years he built 12 more and, by his early thirties, found himself the owner of a mini fiefdom.

It was around this time, in 1965, that a Texas-based convenience store company named 7-Eleven set its sights on L.A. — and on driving Pronto out of business. Coulombe considered fighting them, but, he says, “I knew eventually they were going to kill me.” 7-Eleven quickly bought out Speedee Mart, a chain of 100 convenience stores, then began converting them to Slurpee dispensaries. Coulombe guessed he had less than a few years to think up a concept that could compete. Luckily, he was an avid magazine reader. In Scientific American he learned that a new class of overeducated, underpaid adults was being produced by the burgeoning college system. Sophisticated shoppers were not necessarily wealthy shoppers, Coulombe theorized; they were educated buyers trapped in economic stasis. He decided to mate the convenience store with the liquor store, and that was Trader Joe’s, “Phase I.” His customers would be the classical musician, the journalist, the teacher, the young doctor. In a different article Coulombe read that the more education a person had, the more they drank, so he stocked 70 bourbons and about 100 scotches. (“I had penciled out what a union journeyman made to figure what I would pay my employees,” he says, “and adding liquor was the easiest way to fund those wages.”) Coulombe read about a jet known as the 747 that promised inexpensive air travel to Europe; Trader Joe’s would need to broaden its tastes to match the new traveler. In another magazine Coulombe discovered that the earth’s biosphere was threatened. Overnight, he says, he became a self-professed “Green” and spliced the health food store and the gourmet store onto Trader Joe’s. This was “Phase II” of Coulombe’s company.

Finally, Coulombe gave Trader Joe’s something most grocery chains didn’t have: a personality. It would have its own take on the world — cultivated but casual, spontaneous, moderately liberal, and smart. When you walked into a Trader Joe’s, you would know the store’s tone and its attitude. The personality that Coulombe conceived remains to this day the company’s voice: The Fearless Flyer.

Coulombe continued to tinker with Trader Joe’s. In 1972, he devised what he calls “Trader Joe’s, Phase III.” At that time the trend in grocery merchandising was bigger. Throughout the ’70s, supermarkets were headed toward becoming the 40,000-square-foot behemoths of today that can carry 50,000 items. Yet such steroidal markets would encounter drawbacks to their muscled dimensions. Eighty percent of supermarket shopping time is spent moving from product to product. Half of all store trips are for five purchases or less, and customers on such trips aren’t searching for sale items — price does not alter the behavior of someone looking for only a handful of things. What did this mean for supermarkets? As their floor plans expanded, their sales volume per square foot shrank. They were forced to invent new schemes to compensate for lost profits, charging fees to manufacturers for store placement and “floating” cash (earning bank interest on the daily take).

So once again Coulombe thought small. Instead of 50,000 shelved items, he would drop his number from 6,000 to 1,000. If supermarkets sold 20 kinds of cat food and 40 detergents, he would sell one of each. In doing so, Coulombe maximized the velocity of dollars entering his registers. Shoppers moving 5 feet between purchases instead of 50 pass through a store more quickly, leaving more cash behind. The average supermarket brings in $10 million to $30 million annually in sales. A Trader Joe’s one-fifth the size of a supermarket can make $1 million in a week’s time. Square foot for square foot, that Trader Joe’s outperforms an average Walmart, which would have to do $30 million in business to match it during the same period.

“I took her down to the rocker arms,” says Coulombe, describing the work he did in the late ’70s. “That’s the Trader Joe’s you know today.”

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