Joe's Goes: The Truth Behind Economic Development

"To Our Valued Customers: We are committed to continuously improving diversity and inclusion throughout every aspect of Trader Joe’s. We continue to dedicate ourselves to doing the work, every day, to ensure Trader Joe’s is an environment that is safe, welcoming, inclusive, and respectful for all Crew Members and customers."

According to the California Association for Local Economic Development, "Economic Development is the creation of wealth from which community benefits are realized. It is more than a jobs program, it’s an investment in growing your economy and enhancing the prosperity and quality of life for all residents."

Economic development is an important aspect of community development typically done at the local level. Why? Because cities are a reflection of their residents' unique wants and needs. Therefore, economic development for one city can be different for another because cities must cater to their residents' desires. A common desire residents have are grocery stores.

Let's get one thing straight: economic development is a two-way street. Residents may want certain businesses to move into their city, but if those businesses show no interest in moving there, nothing will come to fruition. For example, residents can encourage city planners to reach out to grocery stores to provide information on where that store can establish (zoning) and, if necessary, any specific regulations or conditions that the store must abide by according to a city's municipal code (city laws). But, grocery stores may not want to move into that city because the information provided may have dissuaded them, or those stores may not want to locate for personal reasons.

Will moving to that city be economically beneficial? What does the pool of consumers (and workers) look like? How will moving to said city translate to the economic vitality of the store? What are the costs and benefits of moving, and do overall benefits outweigh the costs? These are some of the questions that grocery stores ask themselves when deciding where to set up shop. If a grocery store chooses not to be in a city, any efforts made by the city in trying to persuade the store is completely lost.

This story map will look at a grocery store, Trader Joe's, and analyze which areas they locate based on certain neighborhood characteristics. Essentially, the story map will observe the relationship between neighborhoods and Trader Joe's. The geographic areas of focus for this research will be Los Angeles County and Orange County.

If you ever walked into a Trader Joe's, the first thing you may notice is the size of the store. The average size of a typical supermarket is 51,000 square feet. The average size of a Trader Joe's is 10,000 to 15,000 square feet. That is a huge difference in shopping area.

Does a smaller shopping area translate to fewer sales? Not exactly. Trader Joe's is very successful in generating sales per square meter. According to Bloomberg Opinion, Trader Joe's is generating around $25,000 in net sales per square meter. Other supermarkets, such as Walmart, are not making nearly as much per square meter as Trader Joe's.

When looking at the total net sales generated by Trader Joe's over the course of 6 years, it is anticipated that Trader Joe's will be making more revenue in sales every year, starting with 2019. It should be noted that 2019 is based on actual net sales and 2020 to 2025 are projected net sales, not taking into account the devastating financial impact of COVID-19. Therefore, numbers may be smaller than the graph. Regardless, Trader Joe's will be doing very well as a business for years to come.

By looking at the financial situation of Trader Joe's, cities should want a store for themselves. Cities are missing out on potential sales tax revenue, more jobs, more foot traffic, and an improved quality of life for residents. As we all know, Trader Joe's is very limited, even in the biggest counties in California.

Why is it that only a few cities are able to get a Trader Joe's?

There are 60 stores in Los Angeles County and 22 stores in Orange County (this was gathered from the store's website and cross referenced using Google Maps). If we compare the size of each county to the number of Trader Joe's, the density of stores in Orange County is slightly larger than the density of stores in Los Angeles County.

In other words, Trader Joe's prefer to establish in neighborhoods located in Orange County compared to Los Angeles.

This phenomena can be attributed to many reasons. For one, Orange County has been growing in population size whereas Los Angeles County has been declining in population size, so Trader Joe's has a better chance of gaining more customers. Or, cities in Orange County may be offering better incentives to Trader Joe's to locate into their jurisdiction (like tax breaks) compared to cities in Los Angeles County. Or (and the main reason for this story map), more neighborhoods in Orange County are ideal locations for Trader Joe's compared to neighborhoods in Los Angeles County.

As counties overall, Los Angeles County has a greater proportion of African American and Hispanic populations than Orange County. Meanwhile, Orange County has a higher population density, a larger median household income, and a greater proportion of residents 25 years or older with a bachelor's degree or higher. Even though Los Angeles County is more diverse, Orange County is wealthier and more educated based on the criteria in the graphs below. Could neighborhood characteristics be a driving force for Trader Joe's destinations?

It is very likely that Trader Joe's choose their locations based on neighborhood characteristics by surveying a neighborhood to look for certain demographics. This could explain the higher density of stores in Orange County.

"The typical Trader Joe's shopper is White or Asian and between 25 and 44 years old... [they] typically [have] a bachelor's degree or above and an annual income of more than $80,000."

We will take a look at 4 neighborhood characteristics; Race and Ethnicity, Population Density, Median Household Income, and Educational Attainment; and compare neighborhoods across both counties to the location of Trader Joe's.

Just by observing the four chosen neighborhood characteristics in relation to where each Trader Joe's is in both counties, certain characteristics may influence where Trader Joe's goes. To summarize the findings:

1. One would typically find a Trader Joe's in majority White neighborhoods instead of majority Asian, Hispanic, and African American neighborhoods.
2. One would typically find a Trader Joe's in median-densely-populated neighborhoods, with some stores in low-densely-populated neighborhoods and very few in high-density populated neighborhoods.
3. One would typically find a Trader Joe's in wealthier neighborhoods where the median household income is high relative to other neighborhoods nearby.
4. One would typically find a Trader Joe's in neighborhoods with higher proportions of residents, 25 years old or older, that have a bachelor's degree or higher (highly educated neighborhoods).

Because Trader Joe's favor neighborhoods with certain characteristics, other neighborhoods with similar characteristics are left out. For example, Trader Joe's are rarely in neighborhoods identified as Disadvantaged Communities.

California Senate Bill 535 authorized the California Air Resources Board (CARB) to identify neighborhoods that are "disadvantaged" to direct Greenhouse Gas Reduction Funds to these neighborhoods. To determine neighborhoods that are disadvantaged, CARB looks are areas that are heavily affected by environmental pollution and other hazards that can lead to negative health exposures AND areas with high concentrations of residents that are of low income, high unemployment, low levels of homeownership, high rent burdens, sensitive populations, or low levels of educational attainment.

And, as mentioned earlier, Trader Joe's tend to avoid neighborhoods that are labeled as Disadvantaged Communities. Residents with minimal resources and poor community health are unable to receive the benefits of a store in their area (see the map below).

As you may remember at the beginning of this story map, Trader Joe's is making it their mission to improve diversity and inclusion throughout every aspect of the store. One aspect, location, seems to be lacking in diversity and inclusion. While some neighborhoods get to enjoy the benefits of a Trader Joe's, other neighborhoods are left out leaving residents to wonder why there is not a store nearby.

All-in-all, cities could do everything in their power to get a Trader Joe's into their jurisdiction, but with certain neighborhood characteristics, it is more likely for a Trader Joe's to decline or accept the opportunity. Economic development is a two-way street. Neighborhoods that want a Trader Joe's can only hope that Trader Joe's want them.

ArcGIS Online. Living Atlas.  https://livingatlas.arcgis.com/en/home/ 

Bean, Jordan. America’s Beloved Grocery Brand: The Analytics Behind the Unexpected Success of Trader Joe’s.    https://jordanbean.medium.com/the-analytics-behind-the-unexpected-success-of-trader-joes-12318e715132 

Bloomberg Opinion. The Future of Trader Joe’s Looks Bumpy.  https://www.bloomberg.com/view/articles/2020-08-21/the-post-pandemic-future-of-trader-joe-s-looks-bumpy?utm_source=website&utm_medium=share&utm_campaign=copy 

California Environmental Protection Agency. SB 535 Disadvantaged Communities (2022 Update).  https://experience.arcgis.com/experience/1c21c53da8de48f1b946f3402fbae55c/page/SB-535-Disadvantaged-Communities/ 

California Public Utilities Commission. Disadvantaged Communities.  https://www.cpuc.ca.gov/industries-and-topics/electrical-energy/infrastructure/disadvantaged-communities#:~:text=Disadvantaged%20communities%20refers%20to%20the,of%20asthma%20and%20heart%20disease. 

Poonia, Gitanjali. Is Trader Joe’s really a ‘neighborhood store’ for every location?  https://www.deseret.com/2022/4/28/22969583/trader-joes-really-a-neighborhood-store-for-every-location 

Reuter, Dominick. Meet the typical Trader Joe's shopper: a younger, married, college-educated person earning over $80,000.  https://www.businessinsider.com/typical-trader-joes-shopper-demographic-younger-married-earning-80k-income-2021-9 

Trethewey, Cole. The Average American Spends This Much Time Driving to the Grocery Store.  https://www.nasdaq.com/articles/the-average-american-spends-this-much-driving-to-the-grocery-store 

United States Census Bureau. Data & Maps.  https://www.census.gov/data.html