Limited Growth Seen for Warehouse Clubs

Sep 23, 2002

Warehouse clubs have just about reached their point of diminishing returns, according to industry analysts, reports Reuters.

Currently, the three major chains, Costco, Sam’s Club and BJ’s have approximately 950 stores. Wayne Hood, Prudential Securities, “believes the U.S. market can support between 1,100 and 1,200 clubs.”

Others, however, aren’t quite so sure. Phil Lempert, the supermarket guru himself, said “As consumer shopping habits change, the warehouse club trip may become a more routine part of consumer shopping places in the future.”

An online poll of 1,375 people conducted for the Food Marketing Institute on Mr. Lempert’s site,, found that warehouse clubs appear to be capturing sales from supermarkets. Supermarkets continue to turn to the format to make bulk purchases of detergents and other household products.

Moderator’s Comment: Are there (almost) too many warehouse
clubs operating in the country?

It seems not that long ago, pundits were saying that warehouse
clubs were going to force supermarkets to go the way of the dinosaur. That clearly
didn’t and isn’t going to happen. We wouldn’t bank on the country only being
able to support another couple hundred clubs.

The clubs, however, are probably more concerned than management
is letting on. Costco is in the process of converting a former HomeBase store
into its own home furnishings format, Costco Home.

Do not expect to see the clubs do away with their membership
fees as suggested as a possibility in the Reuters article. The membership
fees enable, in part, the format to profitably work on its historically low
sales margins. [George
Anderson – Moderator

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