Trader Joe's Torpedoes Pirate Joe's, Sues Its Own 'Best Customer' (original) (raw)

Trader Joe's Tempe AZ (Photo credit: Nick Bastian Tempe, AZ)

Grocery chain Trader Joe's has opened up a legal can of whup ass on its self-professed "best customer," Pirate Joe's.

Vancouver, British Columbia shopkeeper Michael Hallatt, claims to have spent more than $350,000 at Trader Joe's in the past two years. Trader Joe's would like him to stop shopping there. What gives?

Hallatt, makes frequent drives across the border to shop the U.S. stores, then resells popular Trader Joe's branded products in his own store, cannily called Pirate Joe's.

Trader Joe's is not happy and filed a lawsuit in California aiming to shut him down, according to the San Francisco Chronicle. The case may or may not have merit.

Pirate Joe's exclusively sells Trader Joe's branded products and consistently ranks high among shoppers' favorite stores. It sells mostly private label items developed by or labeled for Trader Joe's. In the grocery business, Trader Joe's is called a limited assortment retailer. Like its sister company Aldi, they sell a proprietary selection of products almost exclusively.

Products that can't be bought anywhere else, except maybe Pirate Joe's.

As as shopper, it's hard to stand in judgement. Were I to land someplace without a Trader Joe's, the desire for coconut milk and dark chocolate coated almonds could force me into the black market. And given the demand for cult favorites like Charles Shaw wine (Two Buck Chuck) and Speculous Cookie Butter (they can't keep it in stock), it was only a matter of time before someone saw a business opportunity.

And therein lies Trader's Joe's point. Hallat doesn't sell perishable items, so some regulations don't apply here. I'm not a legal expert, so there's no telling how this will play out, but Trader Joe's has much to protect. Even from a single pirate.

First, stores have a difficult enough time keeping shelves stocked with popular items. Trader Joe's locations are very small, back room space is limited and inventory tight. This is a remarkably lean operation, one that runs like clockwork -- someone regularly emptying shelves to sell across the border can wreck havoc with operations.

Second, the Trader Joe's brand is everything. It's been cultivated quite carefully over the years. Each store branded product given a catchy name, back story and personality. Yes, a product with personality. That's how good Trader Joe's is.

Trader Joe's doesn't operate in Canada, but it might. The company filed for a trademark there in 2010. Opening stores in Vancouver, in Pirate Joe's territory, may not be far off.

And finally, there's the problem of pirated goods in general. Luxury brands regularly police pirated goods and employ legal tactics to stem the tide of faux or illegally obtained goods. Comparing cookie butter to Louis Vuitton may seem silly, but it's the company's currency and carries value in the marketplace.

Hallatt is profiting from another business' product and investment. Trader Joe's invests in the product development, carries the production, transportation and inventory expenses, and pays for the marketing. A 2to2 to 2to3 markup adds to the perception that Trader Joe's prices are high, sells them in an environment the company has no control over and if something sold is bad, expired or damaged in some way, the Trader Joe's name is on it.

Not good for the company.

Hallatt may be a canny entrepreneur supplying a need. But those bottles of Two Buck Chuck shouldn't be his to resell for $5.