Most major clubs experiment with delivery – warehouse membership stores
Most Major Clubs Experiment With Delivery
As increasing competition in the membership warehouse club industry whittles the number of chains to little more than a handful of large players, many of the clubs are offering new services to their members. These services go beyond the traditional barebones, cash-and-carry concept upon which the industry has prospered.
Although different clubs are offering varied services–like new car sales at one chain and optical departments or pharmacies at another–one area that has drawn almost universal interest is delivery service.
Generally provided to business members, delivery is currently in at least a test phase at most of the major clubs.
Although the service runs contrary to the industry’s original concept that additional services like accepting credit cards or offering delivery are luxuries that the low margin clubs cannot afford, executives at most clubs were quick to point out that only those members opting to use delivery pay for the service. The cost does not get passed on to the price other members pay for merchandise.
San Diego-based Price Club, the pioneer of the membership warehouse club concept, is offering delivery service to its members on test basis. While a business member of the chain’s initial location on Morena Boulevard ran a delivery service at one time, Price Club vice president of marketing Brent Knudsen said the company is now solely responsible for all delivery programs.
One company test is taking place in the Washington, D.C., area, where for a flat $15 fee, Price Club business members can phone or fax in an order for delivery, according to a local company source. In addition to the fee, all products are marked up 2 percent to 4 percent to cover the cost of handling. Payment is cash on delivery. The clubs are shipping all categories of merchandise except perishables, jewelry and clothing.
Club Wholesale is currently offering delivery in just one location–Boise, Idaho–the chain’s home market. Available to business members for the last three years, the service is primarily used by companies outside of the immediate Boise area and “definitely brings in added dollars,” according to company marketing director Karen Abner.
Members are charged a fee for the service, and items like office furniture, office supplies and some food items are typically ordered for delivery. Although the company has looked at offering delivery beyond the Boise location, future expansion of the service is still uncertain, Abner said.
Unlike these chains, which operate their own delivery programs, much of the industry prefers to let a separate third party handle the service.
At Sam’s, the membership warehouse club arm of Wal-Mart, the chain allows each warehouse location to set up a delivery service with a third party company if they feel the service is warranted by membership requests, according to company vice president of operations Chuck Webb.
Although Sam’s has set a delivery fee of about $25, Webb said it is up to each delivery company to put together a catalog and handle the actual operation of the service. Webb said Sam’s first started offering delivery through the various outside companies about a year ago, and currently, about 40 to 50 of the clubs are offering the service.
“We do it [delivery] if it is something the members want,” Webb said. He noted that the company does not feel it is straying from the regular cash and carry business.
Costco president Jim Sinegal was also quick to note that the Kirkland, Wash.-based company’s delivery service is not a diversion from the core business. “It’s really a non-factor, and not a big deal” in the total business scheme, Sinegal said.
Offered in a few of the chain’s markets, Costco’s delivery service is primarily handled by different local third-party businesses, although the chain does manage delivery in some markets. In the greater Seattle area for instance, a former Costco employee has set up his own business to run the delivery service in that area.
Price Savers is also using outside companies to deliver products to business members in select markets. According to company creative marketing manager Helen Draper, the Salt Lake City-based chain started offering delivery in Utah over a year ago, and has since included the service in some Arizona and California locations.
The Wholesale Club is also offering a similar program. Started this summer, four warehouses are currently under a full test program, while a few other locations are also under a partial test, according to Tom Geisse, senior vp of marketing for the chain out of Indianapolis, Ind.
With the help of a catalog, members either fax or phone in their orders, which Geisse said typically consist primarily of office supplies. Members can either have their purchases picked and staged for pick up, or they can have it picked and delivered.
According to Geisse, customer requests prompted the delivery service, and he said if members want to pay for the service “why would you not do it?”
Although still in a test mode, Geisse said: “We believe it to be viable. We just need to fine tune it. We have to make sure we’re not just trading dollars and that it’s bringing in new members.”
About the only major membership warehouse club chain not offering some form of delivery service is Natick, Mass.-based BJ’s Wholesale Club. While company president Jim Halprin offered “no comment,” on the subject, both a company headquarters source and an employee at one of the chain’s locations said BJ’s does not offer delivery.
COPYRIGHT 1990 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.
COPYRIGHT 2004 Gale Group