Through a special arrangement, what follows is a summary of part of a current article from Private Label Buyer, presented here for discussion.
While it's doubtful most retailers would want to copy Trader Joe's Hawaiian-shirt-wearing employee dress code or start putting grass huts in their aisles, they can learn some important lessons on how to make their private label lines as appealing to consumers.
Today, Trader Joe's stocks a limited assortment -- about 2,025 SKUs -- and roughly 85 to 90 percent of those are private label offerings, says Len Lewis, author of The Trader Joe's Adventure, published in 2005. Average annual sales per square foot for all its stores are $1,372, double the industry averages, estimates Planet Retail, the London-based retail research firm.
Trader Joe's delivers quality in its private label products at prices below those of national brands. At the same time, it sprinkles in uniquely sourced outside brands and products to cultivate the sense that shoppers are in for a shopping adventure every time they step into the store. When it finds branded products that click with consumers, the retailer often will create a private label version with differentiating characteristics to help it stand out on shelves.
But the overarching message for other private label retailers in the Trader Joe's formula is the importance of maintaining a consistent image -- from the look and feel of stores, to packaging and product sampling, to its offbeat marketing through the Fearless Flyer newsletter.
"They have a brand promise ... and they have a brand personality that is consistently brought to their marketing campaigns," said Jim Hertel, managing partner with Willard Bishop.
Its success also shows that stores shouldn't be afraid to create private label brands that have some quirkiness of their own, noted Kirsten Osolind, CEO and founder of RE:INVENTION Marketing.
Constant product innovation is another Trader Joe's hallmark others can emulate. The retailer's website notes that 10 new products are rolled out each week. Introducing new private label offerings and even limited time ones create the sense of discovery common at Trader Joe's and others such as Costco, which employ rotating limited-time specials. Be the first in a new category rather than a follower of national brands, advises Blair McCaw, president of Constellation Management Group.
"For so long, retailer private label strategy was really about just mimicking the national brands. It's only been the last three to five years that retailers have started to develop brand management functions in their companies and think about building or licensing brands to differentiate themselves. Trader Joe's was out in front of that for a long time," Mr. McCaw says.
Another lesson is to do whatever you can to make the shopping experience a fun one for consumers. That doesn't mean just making kitschy outfits standard uniform, says Ms. Osolind, who was Whole Foods' national marketing director in the late 1990s and early 2000s. Rather, it can relate to store flow and consumer education efforts in-store.
"In a hypercompetitive world, differentiation is really the holy grail of retailers," Ms. Osolind says.
Discussion Question: What lessons does Trader Joe's success offer those looking to develop their own private label programs?