Financial 411: The Appeal of Trader Joe's

The biggest bankruptcy in U.S. history could have been avoided, according to the man at the helm at the time. Former Lehman Brothers CEO Richard Fuld told a panel investigating the financial crisis that his firm repeatedly asked federal regulators for emergency assistance in September 2008, and was repeatedly denied aid, even though other big banks did later get a government bailout. The panel also heard from regulators, including the Federal Reserve, which said it did everything in its power to save the storied investment bank.

It appears the car industry may have suffered its worst August in 27 years. Ford saw sales decline 5 percent from July, while Toyota's fell 12 percent. Total U.S. car sales could drop below one million new vehicles for the month.

Despite that news, stocks are off to a brisk start this September, helped in part by a better than expected manufacturing report. The Dow added more than 2.5 percent today, or 255 points, closing at 10,269. The Nasdaq and the S&P 500 each added close to 3 percent. September is traditionally considered the worst month for stock markets. For more than 50 years, the S&P 500 has fallen an average of 0.6 percent in September.

What Makes Trader Joe's So Popular?

With its offerings of Two Buck Chuck and wasabi peas, Trader Joe's, the offbeat grocery store, has been slowly expanding and winning fans, especially here in New York City. The chain has stores in 25 states and last year had nearly $8 billion in sales. That's about the same as Whole Foods, but Trader Joe's sells less items.    

And unlike Whole Foods, Trader Joe's is a privately held company. Extremely secret, few know Trader Joe's is owned by a German family that also owns the Aldi supermarket chain. Beth Kowitt, a reporter at Fortune magazine, wrote this month's cover story, "Inside the Secret World of Trader Joe's." She joined WNYC's Amy Eddings to talk about the latest grocery store to grab New Yorkers' attention -- and dollars.

I thought Trader Joe's was started by some hippies in California. Why's the company so secret?

The company was founded by the original Trader Joe, Joe Coulombe. And he sold to the Albrecht family in the 1970s. Since then, it's been under the ownership of the Albrechts.

And what prompts their secrecy?

Well, they are a private company. The grocery business is very competitive, so they don't have to talk about the business, so they don't, and they use that as an advantage. But also, the Albrecht family is sort of notorious for not talking to the press, and that's trickled down into the culture of Trader Joe's.

How does Trader Joe's differentiate itself from other grocery stores?

The main thing you'll notice if you walk into the store is that it has a limited number of items compared to a traditional grocery. So, you know, you might walk into your big supermarket and they have 50,000 different stock-keeping units or items, and a Trader Joe's will have something around the number 4,000. So they have this limited number of items, and because of that, they do a very high volume on the smaller number.

Why would that be attractive, fewer items? Do they try to make it sort of a cachet of these few, select items?

That's right. About 80 percent of items in the store are in their own brand. And a lot of the items are things that you can't find anywhere else, so for a lot of people, it's not the only shopping trip they'll make in a week. They'll go there for those, you know, as you said, the wasabi peas, the things that are difficult to find, and are sort of small luxuries that you can't get anywhere else.  

Here in New York, people lined up for the Chelsea store opening, and on on the Upper West Side a new store is eagerly awaited by residents. How did the company attain this almost cult-like status?

Well, it's a couple of the things we already talked about, you know, the products that you can't find anywhere else. But also if you walk into the store, it's sort of a cultural experience. It's not just a trip to the grocery store, it's also the atmosphere that they create. You have employees who are wearing Hawaiian shirts, it's fun, it's quirky, it's off-beat, and people want to feel like they're having fun when they're doing what's basically a chore. Grocery shopping, it's not something that most of us love to do.

And a lot of free samples, right?

That's right, of course.

In your story, you talk about Trader Joe's being at a "crossroads." Can you explain what you mean by that.

I think most people don't realize that it has 350, or approaching 350 stores, and part of their success has been from portraying this image of being the neighborhood store. So I think going forward they're going to have to keep that image alive, even as they grow, so sort of behave as though they are still the local store around the corner, even as they become even more of a national chain.