A 'club' where members jockey past forklifts to snap up bargains
Medford, Mass. — Pascuala Mucci hefts a huge jar of grape jelly. ''Hey, look at this, four pounds for $2.05,'' he says, turning to his wife. ''It isn't Smucker's,'' she retorts after a cursory inspection.
Like many of the shoppers here at the recent opening of BJ's Club Warehouse, the Muccis arrived with a healthy dose of Yankee skepticism. Wandering through the members-only warehouse, many customers scribbled prices in notebooks. Throughout the store, a squadron of honking forklift operators dodged customers and went on stacking everything from Michelin radial tires to Huggies diapers.
For the Framingham, Mass.-based Zayre Corporation, this cavernous 21/4-acre store is its first venture into the blossoming ''club warehouse'' retail segment.
The industry, which now has some 15 major players, has taken its lead from the highly successful ''Price Club'' in California and Arizona. In fiscal 1983, nine Price Club stores grossed $630 million.
A large Midwestern discount chain, Wal-Mart Stores Inc., has joined the fray, too. It has opened five ''Sam's Wholesale Clubs'' (named for Wal-Mart's chairman , Sam Walton) in the past year. The first store, in Oklahoma City, attracts sales of $50 million annually. The Bentonville, Ark.-based company plans 20 cash-and-carry outlets by the end of 1985.
And Zayre has its own expansion plans. In two weeks it expects to open another store in Johnston, R.I., and by Christmas, one in Hialeah Gardens, Fla. Twenty more warehouses are on the drawing boards.
For consumers, the proliferation of this new-old idea gives more folks a shot at lower prices. For retailers, it's an extension of a five- to 10-year discounting trend that companies such as Zayre and Wal-Mart have been built on.
BJ's two-tier membership requirements are typical of the genre. Small-business owners may sign up by showing a business card, city license, invoice, or similar ID. The initiation fee is $30.
About half the warehouse is filled with bulk-packaged foods, reflecting the target market. ''The majority of our business will come from small restaurants, institutions, and small grocery stores,'' says Mervyn Weich, president of the wholly owned Zayre subsidiary. ''We will be a very effective second-source wholesale distributor for small businesses.'' (BJ, by the way, stands for Beverly Jean - Weich's daughter.)
Members of various groups make up BJ's secondary market. This segment is ''limited'' to federal, state, county, city, hospital, airline, bank, credit union, military, and public school, college, or university employees. There is also a ''special'' category for large corporations or churches that wish to join.
By taking the high-volume, no-frills approach (no credit, no delivery, no salespeople, no mass-media advertising) and limiting selection, BJ's can charge business members about 10 percent over cost.
Group members have no joiner's fee but are charged an extra 5 percent more than business clients. This compares with discount retailers, such as Zayre's own T. J. Maxx and Hit or Miss clothing subsidiaries, which usually mark prices up 25 to 50 percent over cost.
Mervyn Weich readily ticks off the advantages of the club retailing concept:
* In addition to the cash it generates, ''by charging a membership fee we know we have a serious customer. We have to do a tremendous volume, so we need serious customers.''
* A membership list is a valuable mailing list. ''It gives us the ability to communicate with our customers. Direct mail is much more cost effective than mass-media advertising.''
* The store gets a record of what's selling and who's buying it. ''When you go through the checkout, you give your membership number, and that tells the computer who you are and what business you're in,'' Mr. Weich explains.
Another marketing plus is the air of exclusivity implied by membership. You can tell admiring neighbors that you paid less for your new color television because you belong to a special discount club. (Appropriately, BJ's has bouncers who check cards at the door.)
Unfortunately, ''There are conflicting tendencies at work in any closed-door operation,'' says Stanley C. Hollander, a marketing professor at the Michigan State University, East Lansing.
''On one hand you have the buying privilege. But you also constantly want to increase volume. As you open up membership to more people to maintain volume, your closed door becomes a revolving door and the edge of exclusivity is lost.''
The other pitfall is competition, according to Mr. Hollander. ''If you're the only operation in a community, you can generate a tremendous amount of business. But as more competitors move in, sales and productivity drop. Then, advertising expenses creep up and pretty soon your prices are back up with everyone else's.''
The club concept is not new. The last heyday was in the 1950s and early '60s, according to William R. Davidson, president of Management Horizons, a market research and managment consulting firm in Columbus, Ohio. As the idea spread, ''stores began to compete and started loosening membership restrictions,'' Dr. Davidson says. ''Competition among like people tends to raise prices as they add niceties to attract customers.'' The concept has resurfaced, in part, because there is room at the bottom of the pricing structure again.
Is this a risky venture for Zayre?
Davidson doesn't think so. It's early in the cycle. And he points out that the real estate risk is minimal; the store can always be used as a warehouse or sold. The inventory consists of top-of-the-line items, which should be easy to liquidate. ''There is almost no risk for Zayre in trying. In fact, there may be more risk in not trying,'' Davidson surmises.
And what does the buying public think? Shoppers in BJ's grocery aisles gave mixed reviews. ''The store is huge, you've got to be able to save on some items, '' says Frank Beninati, a Cambridge fireman, eyeing a five-gallon drum of dishwashing detergent. But he thinks that, figuring in an additional 5 percent for group members, a local food warehouse has comparable prices. Grape jelly shopper Pascuala Mucci agrees, but says, ''I like the selection, and it is easier than looking through the ads.''