This is not good news; Trader Joe's rapid growth imperils cozy feel

November 4, 2011
Trader Joe's rapid growth imperils cozy feel
By Shan Li | McClatchy-Tribune News Service

LOS ANGELES — In the foothills of La Crescenta, Calif., a small Trader Joe's grocery store was nestled in a strip mall of tiny shops and laundromats, a neighborhood institution for 43 years - and the second-oldest location for the popular Southern California-based grocery chain.

But taped on its doors in October were handwritten signs noting the end of its reign: "We're moving!"

When the location closed its doors last week, most of its crew transitioned to the newest Trader Joe's, a built-from-scratch store in nearby Montrose that boasts more spacious aisles, higher ceilings and a trim brick-and-glass exterior.

After decades cultivating an image as the cozy neighborhood grocer, the 14,670-square-foot store highlights the conundrum facing the Monrovia, Calif., company: how to maintain the eclectic, friendly vibe that has garnered it legions of faithful shoppers, while expanding at a brisk pace.

The chain has expanded from more than 20 locations in Southern California in the 1970s to more than 360 shops in far-flung places such as New York, Chicago and Des Moines, Iowa. Its smallest shop, at 5,500 square feet, is in Boston. Last year, the company pulled in an estimated $8 billion in sales, roughly on par with rival Whole Foods Market, based in Austin, Texas.

"Their mission is to be a nationwide chain of neighborhood specialty grocery stores," said Mark Mallinger, a Pepperdine University business professor who has done research on the company. "But there's a dichotomy there. It's like being a national chain of mom-and-pop stores."

The Montrose store features a private parking lot with more than 60 spaces, compared with the 40 slots shared by neighbors of the La Crescenta store, which is about 7,000 square feet in size. The extra floor space will enable the store to carry a greater variety of the low-cost, foodie-friendly offerings it is known for, such as cage-free eggs and milk chocolate-covered potato chips.

"We did not enter into this decision lightly," said company spokeswoman Alison Mochizuki. "But the new location is twice the size, and parking is a lot more ample."

Outside the La Crescenta store one morning before its closure, many shoppers mourned the end of its run and expressed mixed feelings about the move.

Longtime shopper Mel Olinger said an expanded parking lot was enough to win him over.

"It's going to make getting in and out so much quicker. Here, it's definitely a pain sometimes," said the 76-year-old retired chauffeur as he loaded two grocery bags stuffed with organic bananas, organic soy milk and ginger microbrew into his trunk. "They'll also have the same stuff I like and always come by to buy."

But other shoppers, such as Peggy Geragos of Glendale, Calif., said they were uncomfortable with the new store, which lacks the offbeat charm they've come to expect from Trader Joe's.

"I've driven by, and the new building looks kind of shiny and huge, which doesn't square with what Trader Joe's is in my head," said Geragos, a 42-year-old stay-at-home mom. "I'm bummed about losing the homey feel."

Industry experts say the Montrose store is a harbinger of where Trader Joe's is headed as it grows in the coming years and competes head-to-head with upscale grocers such as Whole Foods and Bristol Farms.

The private company has been on an expansion binge the past three years, opening about 40 new stores a year and expanding well beyond Southern California, said Burt Flickinger, managing director of retail consulting firm Strategic Resource Group in New York.

The quirky roots of the company stretch back to the original Joe Coulombe, who opened the first Trader Joe's - still standing today -in Pasadena, Calif., in 1967. He made a name for the store by selling leftover cases of fine wine bought at California vineyards for a low price, and later added health food to the shelves.

He sold the chain in 1979 to the Albrecht family in Germany, which also controls the Aldi supermarket chain in Europe. The Albrechts have owned Trader Joe's ever since and instilled an air of hush-hush secrecy to its business operations.

But Flickinger, who has followed the chain for decades, said the company seeks to expand the size of its shops by building new stores and also renting bigger retail spaces in new markets. A 13,000-square-foot Trader Joe's opened in Los Angeles' Hollywood neighborhood last year. Some stores have already expanded.

The average Trader Joe's store probably will increase from between 10,000 square feet and 15,000 square feet now to 15,000 square feet and bigger, Flickinger predicts. "Trader Joe's can make double or triple the sales volume per week at a bigger store than at a small store, while checkmating competitors," he said.

The expansion comes as many retailers are eyeing Trader Joe's success and experimenting with smaller-format stores that can slide easily into urban areas with lower rents. The Fresh & Easy supermarket chain plans to open about 50 stores next year, averaging 10,000 square feet, along with a few 3,000-square-foot Express shops, said company spokesman Brendan Wonnacott.

Trader Joe's risks alienating longtime fans such as Lucie Hagens, 91, who has shopped at the store in La Crescenta for 28 years. While she understands the need for corporate expansion, Hagens said she would probably switch to shopping at the Vons down the street.

"I don't like learning new stores," said the retired schoolteacher. "If it doesn't have the small-store feel, like here, then I'm not going to make the effort."

Pepperdine's Mallinger said the chain must preserve its quirky store vibe to succeed. But the low-cost products and fierce following it has will carry it a long way during its expansion, he said.

"People go to Trader Joe's because it's fun, the products are unique and the prices are good," he said. "It has a very Southern California culture, and that culture will translate to other parts of the country."

Shan Li writes for the Los Angeles Times.

Read more: http://www.mcclatchydc.com/2011/11/04/129271/trader-joes-rapid-growth-imperils.html#storylink=omni_popular#ixzz1clJbV1PY