August 29th, 2014
Membership Club Shopping: Success in Bulk
Households are beginning to open their wallets and invest in home durables. As big ticket buying recovers, the value proposition found in membership warehouses indicates this retail segment will continue to grow disproportionately compared to other mass merchants. Those brands that can win membership warehouse distribution will reap the benefits.
Costco can be considered best in class among rivals Sam’s Club and East Coaster BJ’s Wholesale Club. Costco is on track to round out four consecutive years of 6% same-store growth. The membership warehouse enjoys a 90% renewal rate among its members who pay the $55 annual fee for the right to shop the store. For a retailer who operates with the thinnest margins in the industry, it is shopper loyalty and value that drives the volume they need to buck the overall retail trend and enjoy profitability as a brick-and-mortar mainstay. In fact only 2% of Costco sales come from ecommerce. Meanwhile, Costco is exploring successful growth categories, such as their ballooning organic food offering, which isn’t cannibalizing their other food SKUs.
In an era where value is king, Costco has mastered the formula for engaging the more affluent shopper. While averaging less than 4,000 SKUs per store, the retailer offers items that one recent independent audit found can save customers 30% over traditional retail in a shopping trip. Along with their mainstay offerings, the retailer employs a strategy of rotating limited-time store facings. This rotation puts regular Costco shoppers “in the hunt” to find what’s new and encourages impulse purchases. As a retailer whose product array spans from motor oil to fine French wines, these limited-time offerings present an opening no brand should ignore.