Sol Price, Warehouse Club Pioneer, Passes Away
Sol Price, one of
the earliest pioneers of the warehouse club channel, died Monday at the age
of 93.
Mr. Price, who opened
Price Club in San Diego in 1976 in an old airplane hangar that once belonged
to Howard Hughes, is widely remembered for his observation extolling the positives
of the “intelligent loss of business.”
While Mr. Price realized
that a strength of his business was not trying to be all things to all people,
another was delivering value to Price Club members. A Wall Street Journal report
recalled an earlier interview with Fortune. “If you recognize you’re
really a fiduciary for the customer, you shouldn’t make too much money,” Mr.
Price once told the magazine.
Price Club and Costco
merged in 1993, creating PriceCostco Inc., and eventually becoming Costco Companies
Inc. in 1997.
Mr. Price along with
his son Robert later founded PriceSmart, a smaller warehouse club format operating
in 11 countries in Central America and the Caribbean as well as in the U.S.
Virgin Islands.
Discussion
Questions: What do you think are the greatest contributions that Sol Price
made to retailing? What is your assessment of the state of the warehouse club
industry today?
His greatest contribution was inventing the retail warehouse. I can remember the first time I walked into the Price Club on Morena Blvd in San Diego and just being amazed at this building filled to the rafters with great merchandise. I can still remember how good my Hebrew National Hot Dog was at the outdoor cafe! This is a huge loss to the retail world.
Club retailing is strong (although you wouldn’t guess that with Sam’s Club’s departure) in Canada. Costco is always adding new clubs and the merchandise mix is always fresh and intriguing. Unfortunately for us, Costco is the only true warehouse player in Canada but they do a pretty darn good job.
I don’t know the full history of the format, but to me, the first Warehouse Club I ever saw was a Price Club. For years after the merger, many people in Northern California still called it Price Club. Today, the evolution, Costco, is the greatest of cross-shopping retail environments, with low income families of 8 stocking up on toilet paper and clothes next to BMW-driving boomers buying Fra’ Mani salumi and Acme bread. And everyone in between (like my family!). That sounds like a democratization of commerce that would have made Sol Price proud.
Sol Price made his largest contribution in developing a very efficient form of retailing that not only kept costs down for consumers but also gave them an exciting shopping experience. To this day, you are always surprised with the items and the prices that you find in all of the Warehouse Clubs. Small businesses, large families, and savvy shoppers all owe him a vote of thanks, may he rest in peace!
Sol Price was an innovator with a clear retailing vision. I remember meeting him when he want to explore a possible merger. At the time Carrefour was making noises that it would capture a big chunk of the U.S. market, a chauvinistic dream which turned out to be a French myth. What happened since then is history. Now Sol has left us but he has left behind the best mousetrap in warehouse clubs. Sol Price was the original San Diego Charger.
He recognized the fact that the leading chains in Southern California were all operating on a high-low business model and there was a big opportunity for someone to deliver consistent value.
It was always about “member value” and how can we cut cost to deliver a better value.
While the chains were focused on lump sum ad fees, add fees for coupon books, co-op fees for TV and rotos, Sol Price focused on “best value every day.”
It was a simple “revolutionary” business model. He dared to be different on something that was very relevant and actionable to shoppers: VALUE!
I tip my hat to Mr. Price. He was born for retail. There may never be a more “fortuitously moniker’d” executive in our industry.
During the high-inflation ’70s and early ’80s, Price shrewdly calculated that by asking for modest membership fees upfront and turning merchandise three times before the supplier invoices came due, he’d never need to invest his own cash to grow the business.
In those days he could afford to sell goods at near-zero margins and still make a profit on the “float” due to the high bank interest rates and rapid sell-through.
It was a privilege to cover Price Club and its imitators in my early days as a retail reporter. Vaya con Dios, Sol.
Sol Price created a juggernaut, and all by giving careful thought to new ways of doing business. As the retail business becomes even more cutthroat, smart retail executives will channel their inner Sol Price and examine new ways to bring value to the customer.
I remember attending an IMRA (International Mass Retailing Association) convention in San Diego as Publisher of Discount Store News in the mid ’80s when many of the CEOs in attendance (including Sam Walton) disappeared during the event for a few hours to go check out Sol Price’s new retail operation. Sam liked it so much, he began drawing up plans for Sam’s Club.
In addition to being the father of the warehouse club, Sol’s genius was responsible for coining the term “the intelligent loss of sales” that explained his limited assortment strategy. Twenty five years later, the concept is hitting the supermarket industry and it’s called “SKU rationalization.” Sol Price was truly ahead of his time and a retail legend.
Most of the comments focus on Price Club, but ignore Price’s earlier innovation–FedMart.
His greatest influence on retail may be indirect–Sam Walton modeled Wal-Mart on FedMart, as well as modeling Sam’s Club on Price Club.
Sol’s greatest contribution was looking at a different way to make money in retailing. His formula was to first get 90 days dating from his suppliers and then turn the inventory 11 times a year. In other words, he sold the merchandise in 5 weeks and paid for it two months later. He made more money below the line than above it. In his 70s, he was quoted as saying “Before I die, I want to open a store with zero gross margin. From this simple formula, he made an entirely new channel. As they say where I come from – Whatta Guy!
The intelligence of the retail world is significantly diminished with his passing.
Sol Price saw opportunity where no one else did and believed, correctly, that consumers would respond very positively if you demonstrated that you were clearly in their corner. Anybody who feels that there aren’t new ways to skin the proverbial cat simply isn’t looking hard enough.