Green eaters will probably be dismayed to hear that Trader Joe’s, that enclave of cage-free eggs and organic veggies, also sells pita chips…made by FritoLay. But that’s the most damning revelation in Fortune’s look at the company, which has managed to maintain its “neighborhood store” feeling even as it expands to 344 stores nationwide. How do they do it? By keeping stores small and offering a narrower selection of always-interesting (and, more importantly, consistently good) products that keep its loyal customer base coming back.
While a typical grocery store sells 50,000 items, Trader Joe’s sells about 4,000. Not only does this comfort customers (it can actually be beneficial to offer fewer choices), it allows TJ’s to sell more of each variety of item, thus ordering more—at a deeper discount. That’s one way it keeps its exotic staples (Thai lime-and-chili cashews, anyone?) more affordable; another is by cultivating super-secret agreements with vendors—who often offer the same product at a significantly cheaper price thanks to TJ’s practice of doing away with extra charges like advertising and couponing.
(Read more Trader Joe's stories.)