Warehouse Club Focus Member Services – Enhancing Membership Value The concept of paid membership is critical to the success of BJ’s, Costco, PriceSmart and Sam’s Club. The paid membership program provides each club with a revenue stream that in most years is equal to or greater than its net income. Paid membership is designed to reinforce member loyalty since the savings received by shopping at a club far exceed the membership fee. Paid membership also discourages the casual shopper, who generally purchases fewer products, thereby reducing the average transaction and making the clubs less efficient. Frontend cashiers can just as easily process a $150 transaction as they can a $60 transaction, and the clubs want to increase the number of larger transactions. Membership revenue strength and strong renewal rates (for example, in its most recent fiscal year, Costco reported that renewal rates in the United States and Canada were 89.9%) are not solely due to the money members save by buying merchandise at each club. The clubs continually try to enhance non-merchandise businesses and services that provide additional reasons for members to renew their club membership and shop in the locations. These member services are primarily out-of-the-box programs, which means the actual transaction and/or service occurs at the member’s business or residence. This article provides an overview of the member service programs at BJ’s, Costco and Sam’s Club as well as some examples of those services. BJ’s Wholesale Of the 16 member services Michael G. Clayman HHC Publishing BJ’s offers, two are business related, six are consumer related and eight are for both business and consumer members. The following are examples of some of those services: Gold Exchange – BJ’s partners with Refinement Services, enabling members to exchange their gold jewelry or items for cash. When the member’s package is received by Refinement Services, a video of the package being opened and inspected is made. That video is posted to the member’s gold exchange account. The amount of the payment is posted to the member’s gold exchange account within a day and mailed. Customers who receive their exchange amount in the form of a BJ’s gift card receive a 2% bonus. Customers who are not satisfied with the payment amount can return their check and receive their merchandise back. Export or Global Sales – For business members who purchase in large volumes, BJ’s will source products for export or domestic distribution. Mem- bers can choose merchandise stocked in BJ’s locations or BJ’s will make one-time purchases for those members. Health Insurance – This program, with eHealthInsurance. com, offers BJ’s members quotes from different insurance carriers with the ability to purchase individual, family, small business, dental and vision insurance. The company is licensed in all 50 states and the District of Columbia and has developed partnerships with more than 180 health insurance providers offering more than 13,000 health insurance products. Home Improvement – BJ’s offers a home improvement service from the Home Service Store ®. The service offers a free in-home consultation and estimate, project guidance and as- Seven Steps to Become the Architect, Designer and Owner of Your Destiny To Register, go to www.NEWonline.org 32 I Food World May 2014 See warehouse club on page 38 Warehouse Club Focus From page 32 surances that the work will be completed by a trained, certified professional. Interior work includes attic energy barriers, blinds and shades, shower liners, cabinet re-facing, kitchen and bathroom, carpeting, flooring and basement finishing. Exterior work includes gutter protection, siding, windows and doors, roofing and sunrooms. Costco Wholesale In 1997, Costco introduced its member services program. The company’s automobile buying service, which began prior to the 1993 merger between Costco and Price Club, was one of the original member service programs. While all Costco members are eligible for its member services program, Costco negotiated additional savings and features exclusively for its premium executive members. Costco’s member service department earns revenues mostly through commissions on each service. Member service employees function, essentially, as buyers and negotiate to make sure the program ultimately offered to members is the best possible value. The programs are reviewed twice a year to make sure both Costco and its partner are benefiting. The criteria for a potential member service include the following five factors: the program needs to offer a great value to the member, an existing large market for the product or service must exist, the product or service needs to have a national infrastructure for support, a pricing model that benefits both the vendor and Costco needs to exist and Costco members need to be treated in the same way as Costco treats them. Just like its club merchandise, member service programs can be discontinued. The reasons include: product or service usage do not meet expectations, the actual product or service does not meet member expectations, there are too many member complaints or issues and product or service pricing no longer offers a value. Of the 38 services that Costco offers in the United States, Canada and the United Kingdom, 12 are for business members, 12 are for consumer members and 14 are for both business and consumer members. The following are brief explanations for some of those services. Auto Program – Costco’s automotive program refers between 600,000 and 700,000 member requests to its 2,500 participating dealerships. More than 40% of those referrals turn into sales. In January, 2012, Costco began offering a 15% discount on parts, labor and accessories for members when they have vehicles serviced at participating auto dealerships. General Motors – In a partnership with General Motors (Digital Journal, November 13, 2013), Costco offered members discounted prices on four General Motors (GM) automobile brands (including Cadillac, Chevrolet, GMC and Buick) covering 15 models. Members who purchased or leased a vehicle between October 15, 2013 and January 2, 2014 received special pricing and a $500 Costco cash card. During the first two weeks of the program, Costco members purchased more than 2,000 automobiles which is more than the first two weeks in the 2011 and 2012 GM programs. Used Cars – Costco is now allowing participating dealerships to list used cars for sale on the site (Automotive News, January 4, 2014). The automobiles must still have at least 12 months and 12,000 miles of a new car warranty remaining and be sold to Costco members for at least $1,000 less than the dealership’s lowest advertised prices. By December, 2014, the program will be available in approximately 75 percent of Costco’s markets. Courier and Freight Shipments– Costco members in Canada can ship envelopes or packages to more than 220 countries worldwide us- Baltimore Indie Group Buys 4 Farmer’s VA Units From page 1 bridge, and Louisa. The latter two stores will continue to operate as Food Depot Cost Plus units while the Luray and South Boston locations, which are still bannered as Farmer’s Foods, are expected to be converted to the Cost Plus format by the end of the summer. The four stores average about 25,000 square feet in size. Cost Plus operations are gaining popularity across the country. Its discount format differs from other “value” operators in that 38 I Food World May 2014 all prices are marked up 10 percent after the retailer’s laid in shelf costs are considered. Cost Plus units are merchandised as conventional grocery stores in terms of item selection and departments with the exception of featuring no service deli or service bakery. Ample in-store signage alerts the consumer about “cost plus 10 percent” pricing. A spokesperson for the retailer group acquiring the four Farmer’s Foods stores said in a statement: “The new ownership group is excited to be growing its combined network of stores (now 12 locations strong) and looks forward to working with the vendor community in the Baltimore and Virginia markets to drive sales the old fashioned way - by selling cases.” As for Farmer’s Foods, founder Johnny Farmer will retain stores in Hopewell, VA; Highland Springs, VA; Dillwyn, VA; and Edenton, NC. Farmer started in grocery business at the age of 14 as a meat cutter and opened the first Farmer’s Foods in 1965, which consisted of just six shelves, a meat case, and a produce case. ing ShipTime’s online service. Members save on express courier and freight shipping, can choose from leading LTL carriers and shipping services are available from anywhere in North America. Identity Protection – Costco and Identity Guard offer the total protection program which includes daily credit monitoring, credit reports from Equifax, Experian and TransUnion, identity theft loss coverage, internet surveillance, public records monitoring and computer protection. Travel – Costco’s travel service, a profitable operation for the club, is owned and operated by Costco and is managed on the same principles that are applied to its club locations. Costco offers a limited assortment of vacations and travel options at a maximum gross margin of 14%. The packages typically include all necessary components including air, accommodations and airport transfer. Costco’s travel business, which began in 2000 with 42 employees, currently has approximately 250 workers. The majority of Costco’s travel employees are non-commissioned reservation agents. Sam’s Club Of the 14 member services that Sam’s offers, four are for business members, two is for consumers and eight are for both business and consumer members. The following are brief explanations for two of its services. Electronic/Computer Recycling- Sam’s Club partnered with NEW to offer a recycling program for electronics and computers called ecoNEW. Product categories include: cell phones, notebooks, computer monitors, digital music players, GPS units, game systems, digital cameras, eReaders and cameras. The items that ecoNEW receives are treated in three ways: refurbished and resold, disassembled for parts and destroyed in an environmentally safe manner. ecoNEW determines the tradein value of the recycled item. In exchange for items that are determined to have trade-in value, ecoNEW provides a Sam’s Club gift card with that value loaded. If an item is determined to have no value, ecoNEW will help recycle it. SBA Loans– In 2010, Sam’s began offering Small Business Administration (SBA) business loans in partnership with Superior Financial Group. The SBAbacked loan amounts range from $5,000 to $25,000 and include a 20 percent discount on loan fees, low interest rates and no collateral. The program features a one-page online application, electronic funding and payments, no prepayment penalties and no balloon payments. Wegmans Will Enter Richmond From page 1 Wegmans also plans to build a new unit in Charlottesville (I64 and Fifth Street) which is approximately 57 miles away. Currently, the Rochester, NY based retailer operates six stores in the Old Dominion: Dulles, Fairfax, Fredericksburg, Lake Manassas, Leesburg and Potomac. Last month, Wegmans opened its 84th unit, a smaller (80,000 square feet) “fresh” prototype store in Chestnut Hill, MA. Other new stores currently slated to be opened are located in: Burlington, MA (2014); Westwood, MA (2015); Alexandria, VA (2015); Charlottesville, VA; Concordville, PA; Hanover Township, NJ; Montvale, NJ; and Owings Mills, MD. The latter five stores have not yet been given grand opening dates.