Club store strategies for national brands
It all began in an old airline hangar on the wrong side of the railroad tracks in 1976. For a $25 membership fee, local San Diego businesses and consumers could purchase heavily discounted products in bulk across many product categories. The store was sparse – with products on simple shelves or pallets in the brown shipping cardboard box they arrived in from the manufacturers. The success of this retail concept – low prices, limited offerings in bulk packaging, low overhead covered by membership fees, rapid inventory turnover, and large warehouse space – pioneered by Price Club founder Sol Price attracted imitators. In 1983 and 1984, several other retailers entered the market with their own versions of the warehouse club concept.
Fast forward to 2013, the warehouse club channel in the United States is now nearly a $148 billion industry with over 1,600 stores. Over the past decade – from 2001 to 2011 – revenue at club stores rose 7.1 percent annually and the number of stores increased 2.6 percent annually. In 2011, grocery and household goods accounted for approximately 57 percent of the channel sales. For consumer products companies, the warehouse club channel generated 10 percent of sales in 2011, up from 9.4 percent in 2008. While grocery, mass merchandisers, and supercenters account for the majority of sales, this share reflects an erosion of 2 percentage points in three years.
The warehouse club channel is an important and profitable segment for those consumer products companies that have tailored their business toward the club retailers. In other words, some consumer products companies believe they have cracked the code of the unique characteristics of the warehouse club channel in five distinct areas.
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