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Trader Joe Comes Downtown
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| Joe Coulombe, the founder of Trader Joe's, after speaking to 300 people at the Los Angeles Athletic Club. Coulombe, who left the company in 1989, offered advice to entrepreneurs. Photo by Gary Leonard. |
How to Build a High-Paying, Profit-Turning, Booze-Selling Business
BY JON REGARDIE
When Trader Joe's founder Joe Coulombe spoke to 300 people in Downtown last week, question No. 1 didn't get answered. But almost every other query did.
To be fair, there was almost no way he could respond to the prime question of many in the community: When will Downtown Los Angeles get a Trader Joe's? Coulombe left the thriving business 17 years ago and, as he told the crowd, "I don't want to take any credit for anything that has happened since 1989." He knows some details - mentioning that Trader Joe's will do about $5 billion in business this year, for example - but his Tuesday morning talk at the Los Angeles Athletic Club was about entrepreneurship and small business development.
At the gathering sponsored by the Los Angeles chapter of Score, a small business counseling and resource group that is a partner with the U.S. Small Business Administration, the cult of Joe was well represented. It was also remarkably diverse.
The expected business types made up an ample portion of the crowd, all dark suits (for men and women) and briefcases. Then it diverged, to a handful of Euro-inspired business folk (expensive pinstriped suits, carefully gelled and coiffed hair and equally carefully grown scraggly beards) and the hipster business crowd (t-shirts, stylish glasses and tracksuit jackets).
The audience was a mix of old and young, from teens (a group of students from Santee High School came with a teacher) to people in their 70s. There were pierced and shaved-headed listeners and a 60-something man with flowing white locks that looked like they were last cut around the time Coulombe left Trader Joe's. The crowd chattered eagerly, awaiting the secrets.
And when Joe spoke, they listened, scribbled notes and tried to soak it all in.
Words of Wisdom
Coulombe spoke with the ease and persuasiveness of a salesman, which he is in every regard, and which he urged every entrepreneur in the crowd to be. Dressed in a gray suit and a red tie, with his hair close-cropped, his voice was slightly husky, slightly folksy. His diction and cadence were both carefully controlled, his presentation full of purposeful pauses. He came off confident and full of words of wisdom as he chiseled 48 years of business experience into a 45-minute presentation and Q-and-A.
The framework of the talk was the evolution of the business that today counts more than 200 outlets, from the dozens of Trader Joe's in California to a recently opened (and massively publicized) New York City store. His nuggets included:
The difference between invention and innovation. "It is not necessary to invent anything to be an entrepreneur," Coulombe said. "Innovation is necessary, however, to keep a business afloat."
That served as the launch point into Coulombe's freely admitted habit of stealing ideas from other businesses. He noted that Trader Joe's began in 1958 as a small chain called Pronto Markets. Coulombe started it after seeing 7-Eleven in other cities. He noticed a niche and expanded on the 7-Eleven concept by offering health and beauty aids, which at the time were not traditionally sold in supermarkets. "Ice cream was the province of drug stores," not supermarkets, he said, so he added that as well.
Paying high wages. "From the beginning, I said over and over: Full-time employees would make median family income in California," Coulombe said. "That was the most important business decision I ever made in my life.
He said that in the early days it meant paying workers about $7,000 a year, and that today the average full-time Trader Joe's employee earns $50,000. While likely higher than many would expect, he said it contributes to a turnover rate of near zero. He noted that some of the people who began working for Trader Joe's when it opened in 1967 (evolving from Pronto Markets) have only recently retired from the company.
Make what you sell stand out. "You can take any product, no matter how dull a commodity it may seem," said Coulombe, "and if you dig into it, you can find something different that can be exploited."
That lesson was born early, Coulombe, said, with the first Trader Joe's in South Pasadena. The store opened with an alcohol selection far larger than any other local establishment, including 100 brands of scotch and 50 types of rum. That was also the era when alcohol prices in the state were fixed, meaning all merchants sold the same booze at the same price point. Coulombe realized that if he could not win on price, he could woo customers with selection.
Choose your customer. Coulombe elected to make Trader Joe's appeal to educated customers. Rather than going broad and stocking everything, in the early days the company went narrow and specialized in, ironically, healthy foods and alcohol. He dismissed the business advice "know your customer" as passive, instead urging entrepreneurs to pick their target market.
"We're not trying to be all things to all people," he said.
Lessons Learned
When Coulombe finished (after noting that he sold the business to a wealthy family from Essen, Germany), the crowd was smiling and enthusiastic, the not-so-surprising result of getting sold something by a master salesman. Attendees walked out of the free event with more knowledge than when they arrived.
"It really inspired me, and especially the part where he mentioned that he was debt free," said Yvette Thomas, the owner of the one-woman company Wait Wear, which makes t-shirts and underwear that promote chastity and are pitched to teens and young adults. She was especially impressed by Coulombe's ability to run the business without having a distribution center, a truck fleet or even a mainframe computer system that constantly needed updating. Thomas, who is based in Inglewood but is considering moving her business to the Downtown Fashion District, also liked the pay structure.
"That was something I was thinking as I grow my business," Thomas said. "Just making sure your employees are happy because those are the ones who are going to stick with you and be there."
For Victor Monfil, a 15-year-old student at Santee High School, the session was inspirational. Coulombe's message, he said, showed him that, "If you try hard you can succeed in what you want. I wish someday I could start something like he did, and become kind of like him."
While there is still no answer as to when Trader Joe's will come to the Central City, David Eads, senior vice president of the Los Angeles Area Chamber of Commerce, who gave introductory remarks at the event, noted that Coulombe offered advice that applies to the Downtown entrepreneur.
"I think one of the most important messages was define your market. Don't let your customer choose you. You need to choose your customer and then target your company toward that niche," Eads said. "That's a key point that works for any business, especially in a market like Downtown that is very much an emerging market. You've got an influx of people moving into the area, and for a young company that is targeting that, how do you define what your market is?"
Perhaps start with 100 brands of scotch.
Contact Jon Regardie at regardie@downtownnews.com.
page 1, 5/29/2006
Los Angeles Downtown News. Reprinting items retrieved from the archives are for personal use only. They may not be reproduced or retransmitted without permission of the Los Angeles Downtown News. If you would like to redistribute anything from the Los Angeles Downtown News Archives, please call our permissions department at (213) 481-1448.
To be fair, there was almost no way he could respond to the prime question of many in the community: When will Downtown Los Angeles get a Trader Joe's? Coulombe left the thriving business 17 years ago and, as he told the crowd, "I don't want to take any credit for anything that has happened since 1989." He knows some details - mentioning that Trader Joe's will do about $5 billion in business this year, for example - but his Tuesday morning talk at the Los Angeles Athletic Club was about entrepreneurship and small business development.
At the gathering sponsored by the Los Angeles chapter of Score, a small business counseling and resource group that is a partner with the U.S. Small Business Administration, the cult of Joe was well represented. It was also remarkably diverse.
The expected business types made up an ample portion of the crowd, all dark suits (for men and women) and briefcases. Then it diverged, to a handful of Euro-inspired business folk (expensive pinstriped suits, carefully gelled and coiffed hair and equally carefully grown scraggly beards) and the hipster business crowd (t-shirts, stylish glasses and tracksuit jackets).
The audience was a mix of old and young, from teens (a group of students from Santee High School came with a teacher) to people in their 70s. There were pierced and shaved-headed listeners and a 60-something man with flowing white locks that looked like they were last cut around the time Coulombe left Trader Joe's. The crowd chattered eagerly, awaiting the secrets.
And when Joe spoke, they listened, scribbled notes and tried to soak it all in.
Coulombe spoke with the ease and persuasiveness of a salesman, which he is in every regard, and which he urged every entrepreneur in the crowd to be. Dressed in a gray suit and a red tie, with his hair close-cropped, his voice was slightly husky, slightly folksy. His diction and cadence were both carefully controlled, his presentation full of purposeful pauses. He came off confident and full of words of wisdom as he chiseled 48 years of business experience into a 45-minute presentation and Q-and-A.
The framework of the talk was the evolution of the business that today counts more than 200 outlets, from the dozens of Trader Joe's in California to a recently opened (and massively publicized) New York City store. His nuggets included:
That served as the launch point into Coulombe's freely admitted habit of stealing ideas from other businesses. He noted that Trader Joe's began in 1958 as a small chain called Pronto Markets. Coulombe started it after seeing 7-Eleven in other cities. He noticed a niche and expanded on the 7-Eleven concept by offering health and beauty aids, which at the time were not traditionally sold in supermarkets. "Ice cream was the province of drug stores," not supermarkets, he said, so he added that as well.
He said that in the early days it meant paying workers about $7,000 a year, and that today the average full-time Trader Joe's employee earns $50,000. While likely higher than many would expect, he said it contributes to a turnover rate of near zero. He noted that some of the people who began working for Trader Joe's when it opened in 1967 (evolving from Pronto Markets) have only recently retired from the company.
That lesson was born early, Coulombe, said, with the first Trader Joe's in South Pasadena. The store opened with an alcohol selection far larger than any other local establishment, including 100 brands of scotch and 50 types of rum. That was also the era when alcohol prices in the state were fixed, meaning all merchants sold the same booze at the same price point. Coulombe realized that if he could not win on price, he could woo customers with selection.
"We're not trying to be all things to all people," he said.
When Coulombe finished (after noting that he sold the business to a wealthy family from Essen, Germany), the crowd was smiling and enthusiastic, the not-so-surprising result of getting sold something by a master salesman. Attendees walked out of the free event with more knowledge than when they arrived.
"It really inspired me, and especially the part where he mentioned that he was debt free," said Yvette Thomas, the owner of the one-woman company Wait Wear, which makes t-shirts and underwear that promote chastity and are pitched to teens and young adults. She was especially impressed by Coulombe's ability to run the business without having a distribution center, a truck fleet or even a mainframe computer system that constantly needed updating. Thomas, who is based in Inglewood but is considering moving her business to the Downtown Fashion District, also liked the pay structure.
"That was something I was thinking as I grow my business," Thomas said. "Just making sure your employees are happy because those are the ones who are going to stick with you and be there."
For Victor Monfil, a 15-year-old student at Santee High School, the session was inspirational. Coulombe's message, he said, showed him that, "If you try hard you can succeed in what you want. I wish someday I could start something like he did, and become kind of like him."
While there is still no answer as to when Trader Joe's will come to the Central City, David Eads, senior vice president of the Los Angeles Area Chamber of Commerce, who gave introductory remarks at the event, noted that Coulombe offered advice that applies to the Downtown entrepreneur.
"I think one of the most important messages was define your market. Don't let your customer choose you. You need to choose your customer and then target your company toward that niche," Eads said. "That's a key point that works for any business, especially in a market like Downtown that is very much an emerging market. You've got an influx of people moving into the area, and for a young company that is targeting that, how do you define what your market is?"
Perhaps start with 100 brands of scotch.
Contact Jon Regardie at regardie@downtownnews.com.
page 1, 5/29/2006
Los Angeles Downtown News. Reprinting items retrieved from the archives are for personal use only. They may not be reproduced or retransmitted without permission of the Los Angeles Downtown News. If you would like to redistribute anything from the Los Angeles Downtown News Archives, please call our permissions department at (213) 481-1448.
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