Competition Among the North American Warehouse Clubs: Costco Wholesale vs. Sam’s Clubs vs. Bj’s Wholesale

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Case 4 Competition among the North American Warehouse Clubs: Costco Wholesale vs. Sam’s Clubs vs. BJ’s Wholesale Overview In 2010, the nearly $125 billion discount warehouse and wholesale club segment of the North American retailing industry consisted of three principal competitors: Costco Wholesale, Sam’s Club (a Walmart subsidiary), and BJ’s Wholesale Club. Warehouse clubs operated no-frills, self-service big-box facilities where customers could choose from a relatively narrow assortment of discount-priced merchandise across a wide range of product categories, including food and household supplies, electronics, office supplies, selected appliances and furniture items, apparel, books and DVDs, home furnishings, and tires. Items were typically sold in case lots (cleaning supplies, paper products, office supplies, soft drinks, bottled waters); packaged in large containers (laundry detergents); shrink-wrapped in quantities of 6, 8, or 12 (canned goods); bundled in cartons of 100 or more (trash bags, paper plates, disposable cups), or giant-sized bags (potato chips, pretzels). In order to achieve high sales volumes and rapid inventory turnover, warehouse clubs generally limited merchandise selections to brand-name items that were leaders in their categories and an assortment of private-label items. Warehouse clubs drew customers away from other wholesale and retail outlets such as supermarkets, department stores, drugstores, office supply stores, consumer electronics stores, and automotive stores chiefly because it was difficult for such sellers to match the low prices of a wholesale club. Costco, Sam’s Club, and BJ’s Wholesale had substantially lower operating and costs than most retailers because they purchased full truckloads of merchandise directly from manufacturers, displayed items on pallets or inexpensive shelving, kept extra inventory on high shelving

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