Newspaper article The Christian Science Monitor

Low Prices, Bulk Goods Lure Affluent to Warehouse Clubs Industry Sales Figures Have Jumped 2-1/2 Times, from $16 Billion in 1989 to More Than $40 Billion by End of 1994

Newspaper article The Christian Science Monitor

Low Prices, Bulk Goods Lure Affluent to Warehouse Clubs Industry Sales Figures Have Jumped 2-1/2 Times, from $16 Billion in 1989 to More Than $40 Billion by End of 1994

Article excerpt

IT'S an industry that has attracted consumers who are "fed up." They are suspicious of big business and big government, and resent overcharging by contractors.

Such customers are fighting back "against companies that no longer guarantee jobs, paychecks that no longer keep pace with inflation, and pension plans that don't guarantee benefits," claims Gene Wright of Andersen Consulting in Chicago.

Whether or not the wholesale-club retail industry consciously exploits such consumer resentments is a point of debate. But the industry does know its typical customers are affluent, educated homeowners who probably own four-wheel-drives.

They haul store merchandise by the pallet load, which has helped generate annual retail-sales figures that have jumped more than 2-1/2 times in recent years, from $16 billion in 1989 to more than $40 billion by the end of 1994.

Warehouse clubs seem to have found a merchandising-marketing strategy that has put them well ahead of the competition. Many industry experts maintain that, having caught its breath during a recent period of retrenchment, the industry will plunge ahead with greater expansion, though this time overseas rather than in the United States.

The strategy, says Daniel O'Connor, president of Management Ventures in Boston, depends on three things: a limited variety of products, high sales volume, and especially a low-cost structure. "Compared with everyone else, it's the lowest" - two or three times lower than supermarkets.

Little variety at clubs

Usually only one brand - of ketchup, pasta (maybe only fettucini and spaghetti), and flour - is offered. But these brands are almost always the best-known and accepted as top quality by most consumers.

The package size of products is traditionally industrial-strength - for example, 10 pounds of fettucini or 25 pounds of flour. Purchasing in such quantity saves the buyer as much as 33 percent, according to Paul Crnkovich of Cannondale Associates, a club retail-marketing consultant.

As economical as such price levels might seem, clubs do extremely well. Mr. O'Connor, whose company monitors American retailing, says they have the lowest investment percentage - about 11 percent - of any retail operation. …

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