Sixty years ago, Joe Coulombe was a young entrepreneur who ran a chain of convenience stores called Pronto Markets.
Today, he is called “Merchant Joe” and the founder of the national grocery store empire. According to data from Supermarket News and British research company IGD, the chain has more than 530 stores in the United States, has 10,000 employees, and is expected to generate $16.5 billion in revenue in 2020.
According to a memoir published earlier this year, it would never have happened without a few extra-large eggs.
Coulombe died in February 2020 at the age of 89. He told the story in “Becoming a Trader Joe: How I Do Business My Way and Still Beat Big People” published after his death in June. It started in 1962 when Pronto Markets was a small chain store in California with about 10 stores, struggling to compete with larger competitors such as 7-11.
One day, a farmer came to Kulumbe with an offer. “The Egg Man walked into my small office,” Cullumbe wrote. “He has a problem: there are too many oversized AA eggs.”
The desperate farmer offered to sell eggs to Coulombe at the same price as regular large AA eggs, even though they were 12% larger. The farmer’s supply is limited-not enough for a large supermarket to place an order, but if he cannot unload the goods, he will still suffer heavy losses.
Coulombe eagerly accepted the farmers’ deal and immediately advertised discounted eggs, which he sold at the same price as ordinary eggs. Business is picking up-but more importantly, this situation makes Coulombe think about other ways to exploit loopholes and market inefficiencies to bargain.
“The ads we started to completely change Pronto Markets,” Coulombe wrote. “They helped generate the profits I needed, first to make ends meet, and then to build Trader Joe’s.”
For example, one loophole involves imported wine. In 1970, three years after he opened his first store called Trader Joe’s in Pasadena, California, Coulombe found a friendly importer who could cost less than most wholesalers used by other retail stores. The price of buying wine from the famous Bordeaux region of France.
The importer asked Coulombe to set the price and sell the wine to the customer. This means that Trader Joe’s can be lower than the prices charged by other retailers, which are set by wholesalers in accordance with California’s fair trade laws.
“We found a loophole in the law, God, we drove a truck through it!” Kulumbe wrote.
With the development of Trader Joe’s over the years, the egg experiment became “one of the foundations of Trader Joe’s sales,” he wrote, helping him create four tests to determine which products to carry. Items need to be “high value per cubic inch, high consumption rate, easy to handle, and we can stand out in terms of price or classification.”
On one occasion, Coulombe and his team realized that US regulators imposed strict restrictions on the import of most types of cheese in order to maintain the competitiveness of domestic cheese-but there were no such regulations for Brie cheese.
Trader Joe’s soon became the largest importer of Brie cheese in the United States, and even sold cheese at a price lower than Velveeta. Later, the company applied these same principles to products such as whole coffee beans and maple syrup, buying the latter in 50-gallon drums from the Quebec Cooperative.
In his memoirs, Coulombe described the oversized eggs he sold on Pronto Market as “our first product knowledge breakthrough.”
This is certainly not the last time.
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