BJ's Wholesale Club Competition
Now Viewing BJ's Wholesale Club's competition in: Warehouse Clubs and Superstores (primary)
Call Preparation Questions
Customers, Marketing, Pricing, Competition
How does the company attract and retain members? - Premium memberships offer special benefits to preferred customers, and encourage spending by offering rewards. Lower priced and trial memberships attract new customers.
What types of programs does the company offer to attract small businesses? - Companies may dedicate sales resources to recruiting small businesses, or offer special benefits and services (like credit card processing, loans, insurance, and check printing) to attract corporate customers.
Who is the company’s typical customer? - Customers include women in large households (five or more members) with income of $50,000 or more, and small businesses.
What are the company’s most effective marketing vehicles? - Targeted direct mailings attract new members and advertise promotions to existing members. Companies may offer free trial memberships or one-day memberships to attract new customers.
How important is word-of-mouth in attracting new customers? - Word-of-mouth is important, and many enthusiastic club customers encourage friends to join.
How does the Internet fit into the company’s marketing strategy? - Most companies have retail Internet sites that provide basic store, membership, and product information. Companies may offer products or discounts not found in warehouses.
How does the company’s pricing compare to alternative retailers'? - Warehouse clubs sell in quantity, and retail prices per serving or unit can be significantly lower than prices in grocery stores and mass merchandisers. Periodic promotions by other retailers can reduce the effective discount at a warehouse club.
What pricing issues has the company had with manufacturers? - Because some companies consistently sell products at prices below the manufacturer suggested retail price, certain manufacturers refuse to sell to warehouse clubs.
What is the company’s main competitive threat? - Warehouse clubs offer products across many retail categories, and competition includes grocery stores, mass merchandisers, department stores, specialty retailers, and wholesalers.
Competitive Landscape
Demographics and small business growth drive demand, and spending in warehouse clubs generally resists economic cycles. The profitability of individual companies depends on high volume sales, low-cost purchasing, and efficient distribution. Large chains dominate the market due to advantages in purchasing, distribution, and finance. Average annual revenue per employee is about $304,000.
Business Challenges
CRITICAL ISSUES
Low Margins Drive Dependence on High Volume - To be profitable, companies must compensate for low margins through extremely high-volume sales. The business model for a warehouse club depends on volume, and soft sales due to slow store traffic reduce efficiency and increase operating costs. Because companies stock only a few products in each category, merchandising errors can disastrously affect sales. Companies typically carry gross margins between 8 and 12 percent, versus 25 to 35 percent for grocery and general merchandise stores.
Competition from Alternative Retailers - Because warehouse clubs offer products in numerous categories, companies compete with many types of retailers. The market response to a new club can be intense, and deep discounts by competitors on key products can make warehouse clubs appear less attractive. Grocery stores and mass merchandisers offer wider selections and tend to be in more convenient locations. In addition, food retailers carry similar large sizes previously available only in warehouse clubs. Specialty retailers can provide an extremely broad selection within a product category, and typically provide much better customer service.
Industries Where BJ's Wholesale Club Competes
- Retail
- Discount & Variety Retail
- Warehouse Clubs & Superstores(primary)
- Gasoline Retailers
- Grocery Retail
- Discount & Variety Retail
