Nine Business Lessons from a Retail Leader

When Doug Rauch started at Trader Joe’s Co., it was a nine-store chain in Southern California. During his 31 years with the company, with the last 14 as president, what had started as a 7-11 knockoff had grown to become one of the hottest retailers in America with 340 stores in 30 states.

The business grew, in part, by ad­hering to some core principles, and during The NATSO Show 2015, Rauch will share his expertise on building a brand, engaging employ­ees and serving customers. Rauch sat down with Stop Watch to share his insights on key business principles and strategies that made Trader Joe’s a success and shared nine tips on how operators can apply those lessons to their own businesses.

1. Commit Yourself To Your Customers And Your Staff
Rauch told Stop Watch, “All good com­panies have a continual and intense urgency around being better and bet­ter every day. They also constantly ask themselves if they are taking better care of their customers and their employees today than they were yesterday,” he said.

2. Focus On A Sense Of Purpose
Building a lasting business also stems from starting with a great sense of purpose, Rauch said. “With­out a great sense of purpose, great companies don’t go anywhere,” he explained. “Why do you exist? Who would miss you if you disappeared?”

Rauch said, “You don’t have to have a save the world mentality to create your purpose. You can say, ‘There is a need for X and we think we can de­liver on it better than anybody else.’”

3. Infuse The Company Culture With That Purpose
Rauch said, “Successful companies have strong cultures that deliver the purpose of their mission and they do it around extensive care for the em­ployee and the customer,” he said. By using a stakeholder model instead of a shareholder model, businesses can cre­ate value for their customers and their employees. “They can’t simply try to make decisions that are driven by the bottom line or they’ll end up making bad decisions,” Rauch said.

4. Make Decisions With The Customers In Mind
Successful businesses have to show they care about their customers. For example, Rauch helped Trader Joe’s create a private-label brand that could provide customers with the products they wanted at lower prices. Custom­ers have come to love the program.

Rauch said that for any private-label program to succeed, operators have to do it because it provides value to their customers and not just to the business. “Before you launch a private-label pro­gram, ask yourself why you are doing it,” Rauch said. “It has to be because you’re creating shared value with your customers or because they want to have a distinctive product their cus­tomers want that they can’t get from their suppliers.”

He added, “It drives me nuts to hear grocery companies say they’re going to private label to increase their mar­gins—not so they can pass the savings along,” he said. “It has to be win-win. The marketplace is too transparent to­day and you will lose.”

5. Get Employees Engaged
Treating employees as stake­holders helps get them engaged, ben­efitting the business and customers alike. “You have to create a value cul­ture that is more than a transactional relationship where you say, ‘You put in this many hours, I’ll pay you.’ Instead, it is showing that you care about an employee as a person. It is saying, ‘I care about how you care for my customers,’” he said, adding that without engaged employees, it is dif­ficult to have engaged customers.

Rauch added that one of the biggest mistakes all business owners make is that they think they can buy engage­ment. “We think that somehow if you take someone who is slightly dis­engaged or neutral and give them a raise, they will be engaged, but you’ll be disappointed,” he said.

6. Encourage Employee Input
To help foster engagement, business owners should work to create a culture where employees feel com­fortable offering their own ideas and thoughts. “Together we’re smarter than we are apart. None of us is going to have the best idea,” he said, adding that employees need to feel like their opinions count.

Rauch told Stop Watch that some of the best information within a business comes from the front-line employees who are interacting with customers daily. “How many great ideas come from the bottom up? Those companies that let their em­ployees have a voice succeed better than those that stifle it,” he said.

7. Do Away With The Rules
Once companies have estab­lished their values and principles, they can diminish the rules. “Rules are almost always static and can be worked around. You can never come up with enough rules to cover every circum­stance. Companies that provide more freedom do better,” he said.

8. Give Customers What They Want
To better understand what cus­tomers want, Rauch suggests opera­tors simply talk with them. “There is no substitute for physical interaction with your customers. Nothing is as powerful as getting out and asking your customers questions,” he said.

When asking customers ques­tions, operators have to be prepared to get uncomfortable and must not get defensive. Rauch said, “Never justify to or argue with the cus­tomer. Always listen. Ask questions. Why do you think our product isn’t good? What is it you would like?”

9. Push Your Comfort Zone
Rauch said growth occurs in any organization when owners and employees are willing to push their comfort zone. “If you stay within the center of what is comfortable to you, you’re never going to grow,” he said. Be willing to try new products and new programs, even if they are outside of the realm of what you normally do.

Mindy Long's photo

Mindy Long

Before launching a full-time freelance career, Long edited NATSO's Stop Watch magazine. Prior to that Long worked as a staff reporter for Transport Topics, a weekly trade newspaper, covering freight transportation, fuel and environmental issues. In addition to covering the transportation sector, Long has written, reported and edited for a variety of media outlets. She was the Washington correspondent for WCAX-TV (CBS) in Burlington, Vt., a criminal court reporter in Chicago and a freelance copy editor for Kiplinger’s Personal Finance magazine in Washington D.C. Long hold a master’s degree from Northwestern University’s Medill School of Journalism in Evanston, Ill., and a bachelor’s degree in Communications from Westminster College in Salt Lake City.More
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