The Haves Spending More in Clubs
By George Anderson
The lure of great deals on bigger ticket items, from flat screen televisions to fine art, has many affluent consumers willing to pay the membership fee price of admission to Costco, Sam’s and BJ’s, according to the latest issue of Retail Forward’s ShopperScape newsletter.
With the greatest number of stores, Sam’s has the most access to affluent consumers. Thirty-eight percent of consumers identified as “Up Market” by Retail Forward who possess a warehouse club membership belong to Sam’s. Costco, with fewer stores but a more upscale appeal, has 33 percent of the affluent club member population shopping in its warehouse locations. BJ’s has 11 percent.
Source: Retail Forward ShopperScape™
The average purchase by “Up Market” shoppers is $148, according to the research.
As a point of comparison, “Middle Market” and “Down Market” shoppers spend $120
and $129 on each trip to a club.
The vast majority of purchases made in clubs, according to shoppers, is for personal purposes. Eighty-five percent of those in the “Up Market” designation say that is what brings them to clubs.
Most affluent club members report they are spending about the same in clubs this year compared to last. Those spending more (21 percent) and less (19 percent) are roughly even.
Moderator’s Comment: What do you see as the relevant
strengths and weaknesses of the three major membership warehouse clubs? How
will changes in the population (age, ethnicity, etc.) impact clubs in the future
and what will BJ’s, Costco and Sam’s need to do to be successful in light of
the changes taking place? –
George Anderson – Moderator
The aging population and reduction of household size will make the huge economy size packages less practical. Furthermore, the “older old” are less able to drive, and warehouse stores need customers who drive.
It would pay for warehouse clubs to explore services and merchandise assortments for the elderly.
How true, Mark! I was thinking that very thing as I carried two cases of bottled water, a 60 lb bag of dog chow and numerous other staples down my basement stairs the other day. “How would I do this if I were a few years older?”
I’ve long been puzzled over why the Clubs don’t offer delivery services. If you want to appeal to Up Market folks, you could set a minimum purchase of say $250…and, with a reasonable delivery charge, could probably make it a winning proposition for both customer and operator. I know I would personally do 6 months of shopping for many of the large-items I buy all at once. … A huge convenience and, ultimately, a cost savings for all parties, I would think.
I agree with the above comments in that as the affluent population ages, clubs will need to become more shopper friendly. One relatively easy thing is to provide assistance getting things off the shelf, into your cart, and into your car. I’m sure they are already doing this, but they aren’t pushing it. If aging shoppers could carry a paging device while they shopped, to indicate when they need assistance, that would help. And having the cart-retrieving folks at the ready for shoppers leaving the store would help, too. But, Rick, you are going to have to carry your stuff to the basement by yourself. Unless you order from an online service that will ship commodities, and are willing to part with a nice tip for the delivery person.
I’ve always said that club stores are a means of delivering the best value to the people with the best cash flows. The exchange is clear – if you have the space and the cash to stock up you can get the lowest unit pricing on consumables.
The Costco wine department is an excellent case in point. They do a banner business by selling the $30 bottle of California chardonnay for only $23. For the people in that tier of the market, it feels like a bargain. (As for me, I’m usually more comfortable buying two-buck-Chuck at Trader Joe’s.)
So it’s not surprising to learn that the club stores enjoy the highest penetration among up-market shoppers. On a per-club basis, Costco remains the most successful on this metric. BJ’s covers far less territory than either Sam’s or Costco, so its 11% penetration among up-markets is actually a pretty impressive figure.
Here in San Diego, where the original Price Club began, we are used to seeing a majority of Mercedes and Rolls in the parking lot of Costco. Just this week, I saw Dom Perion on sale at Costco for $87/bottle. This was not being bought by the ‘Mid Market.’ Making a value purchase at the best price you can makes sense, no matter what your income level is.
I am not sure Sam’s Club can communicate that message to the up-market target. They have the message, but it is too tied to Wal-Mart’s “cheap price” message. Cheap is not the same as “value at best price.”