On Monday, Fortune came out with a long, in-depth piece on the success of Trader Joe’s – the wildly popular small gourmet grocery store. The chain, owned by German grocery conglomerate Aldi, has experienced dynamite growth in the last 15 years, expanding from its base in Southern California to over 200 stores nationwide. Their sales numbers ($8 billion in 2009) are similar to those of semi-competitor Whole Foods, and their sales per square foot are an estimated $1,750, more than double those of Whole Foods.

Fortune spends a lot of ink (or pixels, I suppose) analyzing aspects of Trader Joe’s success. It’s a good article, but what has made TJ’s such a cultural phenomenon isn’t too difficult to discern. I’d separate it into a few key buckets:

1) Take care of your people

At the large grocery store around the corner from my apartment, pay starts in the low teens per hour. Not so at Trader Joe’s, where full-time associates start between $40,000 and $60,000, and store management can earn salaries in the low six figures. The company also contributes over 15% of employees’ gross income into a retirement account.

But the benefits go beyond pay. TJ’s stores are small, and don’t require multiple layers of management. According to a study done in Los Angeles-area TJ’s stores, employees are trained in many aspects of store operation and feel empowered to make decisions – leading to a collaborative and energetic in-store culture. The results are easy to see – TJ’s has an estimated full-time turnover rate of 4%, much lower than traditional supermarkets.

2) Take care of the customer

When you take care of your people, they’re much more likely to take care of the customer – and that’s just what happens at TJ’s. The depth of the company’s customer orientation is impressive – listening to the customer is much more than a slogan. TJ’s gives no-questions-asked refunds, gives out cookies at store openings, hands out baskets to customers with their hands full, and indicates popular products with in-store signage. Store employees aren’t told the margin on their products, so placement is based on customer needs, rather than profitability. The cross-training mentioned above means that every employee knows where everything is – and will walk you there when you ask, rather than pointing. The result is a fun, casual atmosphere where shopping is enjoyable, rather than a chore.

What’s perhaps more important, though, is that TJ’s knows who its customers are – doing seriously innovative market research to determine if a given area will be open to its freewheeling gourmet ethos. Beyond the typical variables like population density and educational level, TJ’s looks at things like subscriptions to high-end cooking and culture magazines to find critical masses of foodie customers.

3) Keep it simple

What’s perhaps most notable about TJ’s is the size of the stores – typically much, much smaller than the average supermarket. Inventories reflect this: while many grocery stores stock 50,000+ SKUs, TJ’s carries around 4,000, most of which are private labels. Fewer SKUs and fewer brands means less customer effort, something our sister program, the Customer Contact Council, has found leads to better results in a call center setting.

But it also matters that parent company Aldi, which bought TJ’s in 1979, hasn’t tried to micromanage the brand or the culture and has instead let it grow organically (hah!). TJ’s corporate parents visit their US headquarters once a year.

Make no mistake – Trader Joe’s has a very favorable market condition. A major recession has left consumers cash-strapped, while concerns over health and the environment have inspired high-end eaters to embrace nutritious, organic, and locally-sourced foods. Any retailer combining the two would have succeeded in this climate, but the depth of Trader Joe’s success speaks to a serious marketing strategy executed well.

What else do you think TJ’s has done right in generating this kind of cultural cachet? What has parent company Aldi done right in making sure the brand is protected?

MLC members, for more on how your peers have managed the kinds of challenges Trader Joe’s faces, please visit our customer experience and product management topic centers.

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