The Future of Warehouse Clubs
By Al McClain
How much growth is left for club stores? At the recent Nielsen Consumer 360 Conference, Doug Bennett of ACNielsen forecast a bright future for the channel, at least for the near term. Specifically, he noted:
- Future growth, especially likely in the central U.S.
- Room for 300+ additional clubs in the U.S.
- Growing Club penetration, but not as much as supercenters and dollar stores
- Penetration growth coming from upper income brackets
- Five to 10 percent growth in frequency of visits across all club chains
- Channel has large basket size – $83
- High-frequency categories still go to supermarkets
- Clubs do well on high-ring categories
- 42 percent of club shoppers drive 11+ miles to shop
- Club loyalty high and improving
- Perimeter departments growing at double digit pace — dairy, meat, produce
- Club consumers are evangelists — they tell their friends
Overall, the channel provides a great shopping experience, as they are experts at sampling, seasonal merchandising and the “treasure hunt.” Additional services and the Internet are driving additional growth. There are still plenty of opportunities for new locations in the U.S. and especially internationally, and holiday sales have yet to be maximized. Threats to the channel include supercenters, the aging of baby-boomers (smaller households = less need for club sizes), and a re-energized supermarket channel.
Costco is known for high quality brands at everyday value; its high-end items draw shoppers and large basket rings. They plan to build most of their new stores in existing markets and are well positioned on service due to a well-paid and content workforce, providing them with low turnover rates.
Sam’s Club is the most dispersed geographically, and the most aggressive in building new stores. Their business customers are said to spend 50 percent more than their regular customers. They offer segmented services for different member types.
BJ’s is perhaps the strongest player in food, which is up 9 percent annually. In 2005, a food concept store is planned, and they are said to be removing non-food items to be replaced by food. They have extended store hours and plan to focus on the East through 2006.
Smart & Final, exclusively on the West Coast, is a club of sorts, without membership fees. They have fewer and smaller stores, and focus on food professionals. They offer convenient locations and extended hours, and much of their growth will come from the growth of food away from home.
Moderator’s Comment: Which club company do you think has the brightest future, and why? And, what are the short and long-term prospects for the channel?
Club stores are a fun place to shop, but I wonder if that will always be the case. Department stores were once THE place to see and be seen, i.e. Macy’s,
Gimbel’s, and Bloomingdale’s in New York, and look at them now. And, once upon a time, supermarkets were a huge improvement over grocery stores. Things change, and all retailers
need to have their ears to the railroad tracks on a regular basis. –
Al McClain – Moderator