SURVIVE OR BANKRUPTCY?
May 24, 2017,Posted by: V
Fee Free Warehouse Clubs
Around early 2017, a large warehouse club decided to raise their annual fees. While the retail sales are declining, should these warehouse clubs raise their fees or make them fee free?
Early 2017 a brand new Shop Rite® opened in South Plainfield, New Jersey. This store is nothing like the other grocery stores in this area. It is a huge, very well organized store. In the words of my beloved spouse, this store is a combination of Shop Rite®, Wegmans® and Whole Foods® combined in one.
This underlined my thoughts that the world of large warehouse stores may eventually come to an end. Although these warehouse stores like Costco®, BJs®, Sam’s Club® etc. have been in the business for a long time. They have been doing well, so far.
The catch phrase here is “so far”. Over the past few years, sales have increased multi-fold at food markets and retail grocery stores. These stores have done wonderful sales by providing a variety of products, lower prices and coupons despite or maybe due to razor thin margins.
To make matter worse, the grocery retailers introduced club size packaging to tackle the big box warehouse stores. All this for no fee at all. This allows the customers to freely shop around at different stores for their needs.
There is a remarkable business idea that the big box warehouse stores can apply to attract business from “retail” shoppers.
These warehouses can consider offering complimentary memberships to those who buy large amount gift cards. For example if a prospective customer purchases $5500 worth of gift cards of one of the popular big box stores, then 1% of the amount being $55 will more than cover the annual membership. The business gets a substantial amount in advance with a guaranteed sale and the shopper gets access to those few products or services.
There is a possibility that some of the current paying membership customers might not be happy or themselves switch to this option. However, the total amount of advance gift cards sale, will definitely raise the charts way higher than otherwise.
Apart from getting the retail customers in the big box store, the business now has a much better idea of guaranteed annual sales well in advance, which is not otherwise possible.
This idea was presented to the SVP of the warehouse club business in question here, hopefully he will convey it to his superiors. A new business model may rejuvenate the business loss due to major changes in structure or process.
Until then, retail stores have diverse merchandise to choose from, all for no fee at all.
If you are used to online shopping the thought process does not change there either. Amazon Prime® customers get all the benefits, so your search string can include “-Amazon” and the search engines like Google® will ignore and skip results from Amazon. You can add more names, sites to the ignore list as you prefer.
The future AI and drone shipping will definitely have a major impact on any of these businesses. All possible options provided to bring human traffic to the business will help them to remain in the game for a longer period of time.