BJ's Looks to Club Supermarket Competitors

BJ's strategy of offering smaller pack sizes (especially in perishables) is allowing it to overcome one of the major hurdles that prevent further penetration of the warehouse clubs into the supermarket space. The larger pack sizes works well for items for pantry loading but not for limited shelf life items or smaller families.

As people seek greater value the clubs have a stronger appeal. People who would not have previously purchased food items in the clubs are now bragging about how good the products are and what a savings they represent. The smaller sizes opens this to more and more people.

As BJ's gains success Costco and Sam's are likely to try similar practices. Assuming they are as successful, then they too will take more share from traditional supermarkets.

Steve Montgomery, President, b2b Solutions, LLC

Success will be affected by who the company identifies as their primary consumers. Those who shop at club stores often like purchasing in bulk. Attracting traditional supermarket store consumers would certainly be possible with the smaller size products. Containing costs to offer low prices may be difficult to maintain when expanding to more stores and offering smaller quantities.

Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

BJ's should concentrate on becoming #1 in the warehouse category rather than chasing the supermarket business. There's a huge opportunity for them from the selection and size of product perspective in their own segment.

As a Sam's shopper I can tell you that the unexciting sameness of product is pathetic. I shop Sam's weekly for staples, but shy away from food purchase due to the jumbo sizes and lack of selection. If I could find great prices on reasonably sized products at a warehouse club, I would buy them there and not make the additional trip to Kroger et al.

Warehouse clubs already grab market share from the grocery chains, striving for the number one spot in their category would only increase their share killing two birds with one stone.

Marge Laney, President, Alert Technologies, Inc.

I'm not sure there's new ground here. At least in the SF Bay Area, Costco does a great job of competing with supermarkets on the basis of their food and beverage offering. I know when I walk into Costco I can get better quality meat, fish, and bread than I can at the local grocery store. Combined with Target for household consumables and the local farmers market, our family's use of supermarkets is down about 80%--and I think we represent a growing (and valuable) segment.

Jonathan Marek, Senior Vice President, Applied Predictive Technologies

The #3 player in any business isn't going to gain on the leaders by mimicking the leaders' business model. The structure of the warehouse business model doesn't leave a lot of room to be different from competition without breaking the model. BJ's may have found a just enough room within the model to give itself an advantage.

If by offering smaller sizes of grocery products and being more accommodating to the shopper's norms, they can offer one single trip by a customer eliminating multiple stops, BJ's wins. No type of retailer is visited more often than a supermarket. By targeting the supermarket shopper, they have targeted attracting an increased number of store visits which in the long run will give them a total business advantage.

Gene Detroyer, Entrepreneur, Advisor, Consultant, Professor, Independent

I shop and enjoy Costco as a current member. However, my observation and experience being a past BJ's customer until I moved, is that BJ's is better connected to their customer in terms of targeted, personalized communications, innovative use of multi-channel marketing channels and and overall more strategic CRM plan.

BJ's CEO is a driven and proven leader, and I believe is on the right strategic course.

Mike Romano, President, SmartReply Mobile, Social & Digital Marketing

The simple answer to the first question is yes. Club and warehouse stores are clearly more of a competitive threat to grocery stores for a couple of reasons. The first is that the consumer is now more conditioned to accept grocery offerings from warehouse stores than ever before and the second is that warehouse stores are simply becoming better grocers. Their grocery selections, department design and merchandising have all improved vastly and it's difficult to argue with the convenience they offer.

However, I'd be careful in painting all grocery stores with the same brush. I believe there will always be room for outstanding grocers who bring an element of fun, passion and pleasure to buying food. It's a rule that applies to all retail...be small and remarkable or be big and cheap but under no circumstances can you be caught in the middle. The middle is death.

As for sustainable competitive advantage, I don't believe there is such a thing anymore. Technology, competition and consumer preferences change too quickly and constantly to rest on a particular concept or approach. Advantage no longer goes to the company who invents a successful business model. It goes to the company that can continually re-invent its business model successfully.

Doug Stephens, President, Retail Prophet