Lessons from Trader Joe

I just came back from a vacation (free week at a Hilton resort at Anguilla on credit card points if you were curious) and finished one of my beach reads:

Becoming Trader Joe: How I Did Business My Way and Still Beat the Big Guys

I don't read steamy romance novels so business memoirs will have to do. Plus I'm a big Trader Joe's fan.

What's cool about this book is that the founder, Joe Coloumbe, doesn't just spout out abstract business management theories. He gets way into the details about different business moves he made and issues he had to deal with.

For example, did you know that frozen shrimp was a highly sought after food item by thieves? Apparently they have a high value for the size/weight so it's more valuable to steal. Joe discovered this when making efforts to counter retail theft.

You also learn a lot about the retail trade, what makes a good location, what it takes to buy quality merchandise at a good price, how much to pay staff, liquor licensing laws, logistics, etc.

Here's a representative excerpt:

"We decided to sell only whole coffee beans, a field that the supermarkets had almost abandoned in the 1970s. Furthermore, we would varietally label them just like wines. Peruvian Chanchamayo, Nicaragua Jinotega, Colombia Excelso, and so on. We started by selling roasted beans in paper bags, but those bags are even worse than “vacuum-packed” when it comes to preserving the volatile compounds.

After visiting Athens, Greece, in 1980, where so many restaurants roast their coffee on the premises, I was ready to do the same. Many neighborhoods, however, would have objected to the odors generated by coffee roasting. And the process requires special conditions because the beans, for example, have to cool for twenty-four hours. Then Doug Rauch came across a new process for canning coffee, which, instead of drawing a vacuum, flushed the can with the inert gas nitrogen, driving out the oxygen. This is still the way that Trader Joe’s coffee beans are sold, and it’s been a great success.

There is a drawback: the cans come in only one size, but different kinds of beans expand differently when they’re roasted. You can’t have a uniform weight for all beans, something that is foreign to the lockstep mentality of supermarkets, or the big brands of ground coffee. So we simply packed different weights, and explained it in the Fearless Flyer. It worked!"

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As an entrepreneur, he had to deal with both high level ambiguity (what should I do next) and get deep into the details.

When he spotted profitable opportunities, he took the risk.

Not all of then panned out, but enough of them did that he built a hugely successful business in a competitive industry notorious for its low margins.

You will deal with parallel issues as a 1099. You will deal with ambiguity (how to find my first project), details (rates, contracts, security clearances, etc.), and pursue risky opportunities (leaving W2 life).

While you may not have to deal with frozen shrimp theft as a 1099 in the federal contracting world, I recommend reading the book if only to feel some kinship with a fellow entrepreneurial soul who is very clearly a non-bullshitter.

Want the full playbook? Check out Going 1099.