Millions of customers signed up for club memberships for the first time and got hold of them, pushing the chain’s membership value to an all-time high.
KK Davey, president of strategic analysis at market research firm IRI, said: Warehouse clubs have “gained quite a bit of market share during Covid and continue to do so”. “A lot of members signed up. Once you’re in the club, you’ll keep buying.”
Club stores gained 0.5% market share in 2020 and 0.5% in 2021, adding up to about $16 billion, according to IRI data. They also have the fastest sales growth in 2021 compared to last year of any retail channel.
Their revenue and profits have skyrocketed during the pandemic, lifting their stock price.
However, analysts say 2022 could bring more challenges for these chains.
Buy in bulk
When the Covid outbreak began, many customers cut out their favorite Tuesday and Wednesday stores and focused on visiting just one or two.
They make fewer trips to stores to minimize their exposure to the virus, but fill up on the inside and spend more. This happens right in the hands of warehouse clubs, which sell giant packages of ketchup, toilet paper and cleaning wipes.
This trend continues through 2021.
Many are still working remotely or are in a hybrid model. That means they’re still spending more on groceries than they did before the pandemic, and saving time on their living rooms, home offices, and backyards.
According to IRI data, warehouse clubs have the highest growth in customer visits to stores of any retail channel in 2021.
Clubs are happy to take that approach: “The more members buy, the more valuable the membership is to them,” Sam’s Club CEO Kathryn McLay said in an email.
Door to door delivery or curbside pickup?
Covid is also driving more people to shop online.
While warehouse clubs aren’t traditionally the top choice for online deliveries, companies have taken steps before the pandemic to build e-commerce and tech business options. their.
Wholesale clubs “are not always convenient,” BJ CEO Bob Eddy said in an email. “We changed that.”
All three chains have partnered with Instacart to offer same-day grocery delivery from stores. Sam’s Club launches Scan & Go, allowing members to scan items without waiting in line.
During the early stages of the pandemic, Sam’s Club and BJ’s also added same-day curbside pickup for customers purchasing online.
BJ’s online sales grew 44% in the most recent quarter ended October 30 compared with the same period a year earlier. Costco grew 12.1% in the nine weeks ended October 31 – its latest figures. They jumped 42.6% last year.
Sam’s Club e-commerce sales grew 32% in the previous quarter ended October 31.
Sam’s Club found that first- and second-year members tended to be “more digitally engaged” than veteran members, the McLay CEO said.
Young family and new home
The warehouse club model only works if these chains can sign up for annual memberships and convince them to renew.
They make money from membership fees, and the more members pay them, the lower the club can push prices. Without that fee income, the concept would clear up.
Sam’s club doesn’t publicize its membership, but it’s at an all-time corporate high, McClay said.
The majority of new members at Sam’s Club are Millennial families, who buy in bulk for their children and growing family needs, she said.
BJ’s has added about 600,000 new members since Covid-19 began, bringing its member base to more than 6 million.
“The pandemic has resulted in young families moving out of the cities to the suburbs,” said CEO Eddy. “Many of our members join when they form a family.”
Costco added more than 6 miliolan members during the pandemic and now has nearly 62 million members.
Chief Financial Officer Richard Galanti said Millennials make up the majority of new members, adding that his chain has answered some analysts’ suspicions that Costco is more of a store for parents of young adults. young shoppers.
“One of the concerns people have over the years is that we are for the elderly,” he said. “But where else can you get 8 packets of fresh organic kale?”
10, Costco will “see a new wave of members” entering their peak spending years, said Chuck Grom, an analyst at Gordon Haskett Research Advisors.
The future of clubs
Despite the success of these clubs during the pandemic, their path becomes more difficult from here.
As more people return to the office, eat out at restaurants, go to the cinema, and resume pre-pandemic models, they may decide to take a $300 or $400 cut to Costco or Sam’s. That will reduce sales.
Rising prices can also cause some members to lose their membership, especially new members who join.
“As budgets tighten, there will be streamlining of memberships,” said KK Davey from IRI.
However, clubs say people will find ways to save money on groceries and other things as prices go up.
BJ’s Bob Eddy says: “The low price is why they have to pay membership fees. “That becomes all the more relevant in today’s inflationary market.”
