Big dealers: Wholesale clubs still making inroads

There are warehouses across the United States stocked with jumbo tubs of yellow mustard, stacks of rib-eye steaks, crates of Jif chunky peanut butter, and football-sized jars of Vlasic pickle spears.

Such product volume waters the mouths of consumers who have a passion for buying in bulk.

Warehouse clubs offer a tantalizing alternative to the neighborhood supermarket. Their selection is vast and their prices are wholesale - often 20 percent below retail cost.

BJ's, Costco, and Sam's Club - the national chains - have often been thought of as impersonal, industrial, and slightly bizarre. But they're drawing millions of shoppers away from local supermarkets.

Sales among the big three have grown by 9.7 percent over the past 10 years. They have collectively opened 1,100 clubs nationwide, and plan to add 200 branches by 2004, according to Warehouse Club Focus, a trade magazine.

Wholesale clubs have historically lured customers intrigued by the warehouses' treasure-hunt atmosphere, where the spoils of big savings go to the most relentless shoppers.

"Consumers find there's a certain amount of excitement [in] walking through a store with forklifts moving around," says David Merrefield, editorial director of Supermarket News. "There's a charming simplicity to it that rightly makes it seem there's some really good deals there."

Nonperishable household products, like paper towels and dish detergent, are staples of the wholesale-shopping list. And customers have long been able to buy big-ticket items, including televisions and dishwashers.

But the clubs have recently made forays into some new territory, installing bakeries, delis, pharmacies, and even gas pumps.

The strategy to offer more everyday items has worked, experts say. Today, families, not businesses, constitute the majority of warehouse customers. They're beginning to shop at the clubs more than once a month, and for reasons other than to prepare for a global computer crisis or an impending flood.

Burt Flickenger, managing director of Reach Marketing, in Westport, Conn., says 14 major supermarket chains have gone bankrupt in the past five years, largely due to competition from wholesalers.

"Supermarkets have not been up to the challenge between these supercenters and club stores," says Mr. Flickenger. He estimates that families who spend $5,000 a year on groceries save about $1,400 shopping at Costco compared to a supermarket chain.

Judy Capreralla heads to the BJ's store in Medford, Mass., for much of her shopping. She says that she saves about $30 a month on items including dog food, meat, napkins, and produce. Like many loyal wholesale shoppers, however, Ms. Capreralla still goes to the supermarket for items like milk and eggs.

"I just don't have the storage space to buy everything here," she says.

Another inconvenience: Getting there takes her between 15 and 20 minutes in the car.

Warehouse clubs are traditionally set back in remote lots off suburban highways, where property is less expensive and population density is low.

With more customers, however, wholesalers are now seeking a foothold in major cities, where they hope to bring in more foot traffic among single shoppers and small families.

Costco, for one, has stores in downtown San Diego and San Francisco, and plans to open two others in New York's Greenwich Village and Harlem later this year.

(c) Copyright 2001. The Christian Science Monitor

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