As I've said, you can be less exploitative. You can't be not exploitative.
> happy employees
Trader joes employees are not actually paid very well. They're paid okay. Also trader joes is not very successful. They're a small niche, only profitable in the whitest and richest parts of the country.
> seems rather naive and stupid from a branding and long term return perspective
Yes, to an extent. But branding, as I've alluded to, is mostly advertising. The reality of your product is a tiny tiny part of your brand. How your brand is advertised is a much bigger part.
Luxury goods are often not actually higher quality. They just advertise to rich people and have big "no poors allowed" signs on the front door. They create an artificial scarcity in people's minds, and monkey brain says "ooo ooo rare = valuable!!"
Trader joes is cleaner, sure, and the experience is nicer. But from a food quality perspective, how much better is it than Walmart or Target? ... not much. I can find produce and whole-foods at both locations and I can live an equally healthy life with a diet consisting of only foods from Walmart.
But Walmart doesn't have the prices written on cute little chalk boards, so...