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Warehouse club

This article refers to retail stores. For the famous Chicago nightclub, see Warehouse (nightclub).

A warehouse club (or wholesale club) is a retail store, usually selling a wide variety of merchandise, in which customers may buy large, wholesale quantities of the store's products, which makes these clubs attractive to both bargain hunters and small business owners. The clubs are able to keep prices low due to the no-frills format of the stores. They are distinguished from traditional cash-and-carry wholesale businesses in that their warehouses are substantially larger in size, and they do not cater purely to businesses but also allow some or all types of consumers to obtain memberships. They are also distinguished from warehouse stores in that they usually charge annual membership fees, and require presentation of proof of membership at the warehouse entrance and again at the point of sale.

Exterior of a Sam's Club warehouse club store (with the old logo) in Maplewood, Missouri, a suburb of St. Louis
Consumers pick most items directly off pallets in retail-ready packaging (Costco)

Membership in a warehouse club superficially resembles that in a consumers' cooperative, but lacks key elements including cooperative ownership and democratic member control. The use of members' prices without cooperative ownership is also sometimes used in bars and casinos.

History

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A BJ's Wholesale club in Virginia

In 1976, Sol Price (who in 1954 founded FedMart, an early US discount store) and his son Robert Price founded Price Club in San Diego, as their first warehouse club. In a 1988 article, The New York Times Magazine credited Price Club as the "pioneer" of the warehouse club retail format.[1] After his departure from FedMart, Sol Price noticed that small businesses in San Diego either ordered directly from four or five large wholesalers or they bought locally from relatively small cash-and-carry wholesalers.[1] Therefore, Price Club was originally positioned as a much larger, volume-oriented version of the cash-and-carry wholesale format, meaning that prospective members were required to present resale certificates or professional licenses.[1] Based on a customer's suggestion, Price Club subsequently allowed government employees to apply for memberships.[1] This privilege was later extended to employees of utility companies and hospitals, followed by members of certain credit unions and savings deposit clubs.[1]

In 1982, the discount pioneer John Geisse founded The Wholesale Club of Indianapolis, which he sold to Sam's Club (a division of Walmart) in 1991.[2]

In 1983, James (Jim) Sinegal and Jeffrey H. Brotman opened the first Costco warehouse in Seattle.[3][4] Sinegal had started in wholesale distribution by working for Sol Price at FedMart.[5]

In 1983, Kmart's Pace Membership Warehouse (later sold to Sam's Club) started operations. That same year, Sam Walton opened the first Sam's Club on April 7, in Midwest City, Oklahoma.[6]

In 1984, former The Wholesale Club executives founded BJ's Wholesale Club, owned by Zayre.

As of 1988, Price Club was the leader of the warehouse club industry, with over 40 warehouses operating across the United States and Canada.[1] Stephen F. Mandel, Jr., then a Goldman Sachs analyst, called the warehouse club "the greatest revolution in retailing in the last 10 years."[1]

By 1992, Sam's Club had surged past both Price Club and Costco to become the industry leader with 222 warehouse clubs.[7] The four other major players were Pace (95 clubs), Costco (87 clubs), Price Club (80 clubs) and BJ's (31 clubs).[7] Analysts were already seeing signs of market saturation along the West Coast of the United States, the first region in which warehouse clubs were developed.[7]

In 1993, Costco and Price Club agreed to merge operations, after Price declined an offer from Sam Walton and Walmart to merge Price Club with Sam's Club.[8] Costco's business model and size were similar to those of Price Club, which made the merger more natural for both companies.[9] The combined company took the name PriceCostco, and memberships became universal, meaning that a Price Club member could use their membership to shop at Costco and vice versa. PriceCostco boasted 206 locations generating $16 billion in annual sales.[4] PriceCostco was initially led by executives from both companies, but in 1994, the Price brothers left the company to form Price Enterprises,[9][10] a warehouse club chain in Central America and the Caribbean unrelated to the current Costco.[11]

In 1997, Costco changed its name to Costco Wholesale Corporation, and all remaining Price Club locations were rebranded as Costco.[4][9]

As of 2009, the three largest warehouse club chains operating in the United States are BJs, Costco, and Sam's Club.[12] BJ's Wholesale Club is one of the smaller competitors, with stores located primarily in the Eastern United States. Costco and Sam's Club are the largest chains. Costco has locations in seven other nations and regions including Australia, Canada, Japan, Korea, Mexico, Taiwan, and the United Kingdom. Sam's Club, a division of Walmart, claims a membership base of 47 million persons and 602 stores across the United States (as of June 2019).[13]

Examples

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  • BJ's Wholesale Club, operates in the U.S. only
  • City Club, operates in Mexico only
  • Costco, operates in the U.S., Canada, Mexico, the UK, Iceland, Australia, New Zealand, Sweden, Spain, France, South Korea, Mainland China, Japan and Taiwan
  • Metro AG (branded as Makro in some countries), headquartered in Germany, majority control in different regions by multiple third parties, Metro AG has 674 wholesale stores in 24 countries.
  • PriceSmart, operates in Central America and Caribbean; previously operated in Asia-Pacific region
  • Sam's Club, operates in the U.S., Mexico and other countries
  • Selgros, operates in Germany, Poland, Romania and Russia
  • Wholesale Club, operates in Canada

Defunct

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See also

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References

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  1. ^ a b c d e f g Jakobson, Cathryn (December 4, 1988). "They Can Get It For You Wholesale: Sol Price and his warehouse clubs have sparked a revolution in the retail trade". The New York Times Magazine. pp. 24–25, 54–57. Retrieved July 24, 2023.
  2. ^ "FindArticles.com - CBSi". Findarticles.com. Retrieved 23 June 2019.
  3. ^ Chesley, Frank (June 6, 2007). "Biography of Jeffrey Brotman". Historylink.org. Retrieved February 20, 2012.
  4. ^ a b c "Why Become a Member". Costco Wholesale. Retrieved May 17, 2015.
  5. ^ "Costco CEO's legacy continues as he steps down". Reuters. September 1, 2011. Retrieved 2018-02-05.
  6. ^ "Sam's Club celebrates 25th anniversary with nationwide open house" (Press release). Sam's Club. April 10, 2007. Archived from the original on June 15, 2011.
  7. ^ a b c O'Brien, Maura K. (July 18, 1992). "Sales Booming at Warehouse Clubs: Bare-Bones Prices the Main Attraction". Billboard. Vol. 104, no. 29. pp. 44, 52. Retrieved July 23, 2023.
  8. ^ Price, Sol; Helyar, John; Harrington, Ann (November 24, 2003). "Sol Price On Off-Price". Fortune.
  9. ^ a b c "Costco Wholesale Historical Highlights" (PDF). Costco Wholesale. February 12, 2009. Retrieved November 27, 2009.
  10. ^ "Costco, Form SC 13E4, Filing Date Nov 21, 1994". secdatabase.com. Retrieved March 29, 2013.
  11. ^ "PriceCostco Company History". FundingUniverse.
  12. ^ "BJ's Smaller in Store Size but Mightier in SKU Count". Home Textiles Today. Reed Elsevier. July 20, 2009. Archived from the original on November 1, 2009. Retrieved October 28, 2009.
  13. ^ "Walmart Corporate". Corporate.walmart.com. Retrieved 23 June 2019.
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