psychologist explains how Trader Joe's gets you to spend

by Jack Houston

Ever wonder what’s behind how Trader Joe’s success? Jack Houston shares how a psychologist explains how Trader Joe’s gets you to spend more money.

  • Trader Joe’s has a cult-like following, thanks to the way the company seems to make grocery shopping easier. 
  • Data science professionals have ranked Trader Joe’s number one in customer preference for two years running.
  • In 2017, Trader Joe’s made $13.3 billion, yet the brand has no online store, no loyalty programs, and no sales.
  • When you break it down to square footage, Trader Joe’s is actually selling more than double its competitors like Whole Foods.

Following is a transcript of the video:

Narrator: Okay, so imagine yourself at the grocery store. You’re hungry but you don’t really feel like cooking. I guess pasta’s pretty easy. Suddenly you’re faced with this. That’s so many choices. Do you go for the classic tomato basil? How ’bout creamy alfredo? But what exactly is the difference between these two or these three? Wait. Why is this so hard? 

Trader Joe’s is the surfy, laid back grocery chain know for it’s cheap prices and floral print clad staff. Data science professionals have ranked it number one in customer preference for two years running. The brand has held off on going high tech. They keep it simple with no online store, no loyalty programs, and no sales. When you break it down to square footage, Trader Joe’s is actually selling more than double its competitors like Whole Foods. But how much money you spend at Trade Joe’s ultimately comes down to what you are choosing to buy. But what about Trader Joe’s makes it so easy to choose? 

Barry Schwartz: I spent, I’ve spent the last 25 years studying how people make decisions. 

Narrator: That’s Barry Schwartz, a psychologist, a professor, and a Trader Joe’s enthusiast himself. 

Schwartz: I think Trader Joe’s is the best example of how the world should be constructed. 

Narrator: Whoa, take it easy there Barry. Barry coined the term the paradox of choice and quite literally wrote the book on it and it basically describes how you would think that the more– 

Schwartz: Choice we have, the better off we are. That turns out empirically not to be true. When you give people too many options, they get paralyzed instead of liberated. 

Narrator: The store has always focused on a unique selection of products rather than a large amount of them. I wanted to find out if there was choice-limiting going on at Trader Joe’s. So I went to my local market to count some things. I counted 144 pasta sauces, 44 olive oils, and 172 cereals. That’s a lot of choices. So then I went to Trader Joe’s. And they had an approachable 14 pasta sauces to choose from. Same goes for olive oils, canned beans, and cereals. At Trader Joe’s, there’s simply less to choose from. So then I asked Barry if he thought Trader Joe’s perhaps had inklings of the paradox of choice in mind when designing their shopping experience.

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