DISCUSSION

Consumers Go (Warehouse) Clubbing

March 4, 2010Written by George Anderson

Wall Street may have had problems with earnings per share coming in lower than predicted for Costco and BJ's yesterday, but the numbers suggest those two chains along with Sam's are in a pretty good shape compared to many others in the grocery business.

Both Costco and BJ's reported that memberships, customer traffic and revenues were up over the last quarter and same-club sales were up nine percent and 4.6 percent respectively. This followed Sam's same-club gain of 0.7 percent reported last month.

The three warehouse club operators have largely maintained their bottom line balance while traditional supermarket operators have seen revenues and margins erode, despite heavy promotional activity.
There is some thought, however, that tighter pricing by supermarkets may help the channel gain some share currently held by clubs.

"The warehouse is more of a destination, more of a trip," Adam Hanft, CEO of Hanft Projects, told Forbes.com. "Supermarkets can capture business from warehouse clubs as they emulate their model because of proximity."

Mr. Hanft said warehouse clubs could create a sustainable difference by not becoming too set in inventory selection and adding the excitement of the hunt to the shopping experience.

Clubs, he added, have a built-in advantage because club memberships make consumers "feel like they're in a special group, and everyone loves to get past the velvet rope."

Discussion Questions: Are warehouse clubs fully expoiting the advantages they have over retail food competitors? Are the clubs, collectively or individually, in need of reinvention or will they continue to roll along as-is?

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