🧠 How Trader Joe’s Used Psychology to Become America’s Best-Loved Grocer

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Hi there - Jen here :)

Everyone loves Trader Joes.

For the uninitiated (or those folks who don’t live in the US), Trader Joe’s is an American grocery chain that has more than 500 locations nationwide.

But it’s not like other grocery stores.

You see, Trader Joe’s has inspired a cult-following rarely seen in grocery.

Whether it’s their hard-to-find-anywhere-else products:

Their employees’ unique Hawaiian shirt uniforms that are so iconic even DALL-E got it spot on the first time:

or their decor that feels carefully curated and hand-made:

There is just something about this place that people (especially young, well-educated, but budget-conscious shoppers) can’t get enough of.

Unsurprisingly, there’s some fascinating psychology and behavioral science at work in Trader Joe’s experience.

Today you’ll learn:

• How Trader Joes sells more with fewer, but better, products

• How localised stores create brand fans (but still feel like they’re part of a bigger brand)

• How you can use psychology and behavioral science like Trader Joe’s

• PS. Click here to listen to me read today’s newsletter out loud :)

👉 But before we get started, I wanted to let you know that I’m holding a 60-minute live workshop called “Digital Product Psychology Essentials” on June 28th.

The key to a digital product that attracts a massive - paying - user base is baking psychology into every step.

I'll show you how in this live workshop - click to learn more and register. 👉

How Trader Joes sells more with fewer, but better, products

For a grocery store with a comparatively tiny footprint, Trader Joe’s is super effective.

It outsells all other grocery stores - per square foot - in the United States (2x more revenue per square foot than Whole Foods and 3.3x more than Walmart).

It’s because Trader Joe’s offers a limited choice — they only have 3000 SKUs compared to the 35,000+ SKUs of a typical American grocery store.

(A SKU is a “Stock Keeping Unit” for those not up on their retail lingo. There’s one SKU assigned to each product in a store.)

But why does limiting the number of products in store actually increase Trader Joe’s sales?

It’s down to a behavioral science principle known as Choice Overload.

Choice Overload describes the human tendency to be attracted by just enough choice, but then become mentally overloaded if we’re faced with too many options.

Ironically, too much choice can cause us to not choose anything at all - and in extreme cases it can even cause anxiety, disappointment, and even depression.

Trader Joe’s (or TJ’s as many folks call it) reduces Choice Overload in three big ways:

1. Fewer, but better, products

Trader Joes carries about 92% fewer products in its stores, yet creates 200–300% more revenue per square foot than the average grocery store.

Not only that, but Trader Joes carries fewer size and flavor options for each product.

This makes it easier for people to decide to buy, because their option is just buying this product, or nothing.

It’s not one product vs. five different sizes of that product, vs. a competing product they think they might have a coupon for somewhere… you get the point.

2. A simple pricing structure

Trader Joes doesn’t run sales, have rewards cards, or even have coupons.

Week after week, customers know what to expect and they always feel they’re getting value for their dollar.

In fact, Joe Coulombe, the founder of Trader Joe's used a four-part test to figure out which products to carry in store. Unsurprisingly, price is high on the list.

According to his memoir, Joe looked for items that were:

• High value per cubic inch

• Had a high rate of consumption

• Were easily handled

• Offered an opportunity for Trader Joes to lead on price or assortment

3. Owned brands give TJ’s total control

Almost 100% of Trader Joe’s products are made by Trader Joe’s.

There’s another psychological principle at play (beyond simplicity) that make stocking “owned brands” such an effective strategy for TJ’s.

The Thrill of Novelty.

When people discover something unexpected or new, our brain releases dopamine, a feel-good hormone that can get us hooked on people, products, and even retail stores.

That means when you walk into Trader Joe’s and see an interesting new product, you get a thrill because you’ve never seen anything quite like it (and want to grab one while you can).

How localised stores create brand fans

Trader Joe’s stores are really cool and interesting - they have a nautical theme, and each store hires local artists to make sure the decor is personliazed to the area.

It gives the stores a small-town feel, but it also builds on a principle called the Self-Reference Effect.

The Self-Reference Effect says people are more likely to remember, learn, and even be persuaded by information that reflects how they see themselves.

When Trader Joe’s uses images, words, and landmarks that people recognize, they see more of themselves in the store.

But this personalization doesn’t come at the expense of the bigger TJ’s brand.

They are very clear about what their distinctive brand assets (DBAs) are, and never stray too far from them.

DBAs are the elements that make a brand memorable, like:

• Logos: The Nike swoosh or the McDonald’s golden arches

• Colors: Tiffany blue or Coca-Cola red

• Characters: The Energizer Bunny or Michelin Man

• Shapes: Coca-cola’s distinctive bottle

• Sounds: The “Intel Inside” bong or McDonald’s “ba da ba ba baa”

How you can use psychology like Trader Joe’s

If you’re looking to build a cult brand like TJ’s, start by considering these points:

• Offer fewer options: It may seem counterintuitive in the age of personalization, but your products might need to be simplified to maximize sales.

• Pinpoint your moments of Choice Overload: Use customer journey mapping to figure out where customers are dropping off, then strip back options and excess information in these moments.

• Personalize your brand for local markets: Reflect the local area, not matter the size of your brand.

Read, Watch, Listen

• The Psychology of Price: Odd-Even Pricing [Read]

• Headspace: Email Psychology Breakdown [Watch]

• The Choice Hacking Podcast wrapped up Season 5 a few weeks ago, but will be back for Season 6 soon. Click to catch-up before the new season starts on June 12th → [Listen]  

Until next time,
Jen