Warehouse Club Store Time To Take The Treasure Hunt Online-Part three
In Part Three of this Deep Dive, we provide an overview of the warehouse-club sector.
- The 40-year-old global warehouse club sector is estimated to generate approximately $191 billion in revenues in 2017.
- The clubs’ business model seeks to limit gross profits so as to offer low prices to members while generating profits for shareholders through reasonable membership fees.
- The majority of the clubs are located in the US, which accounted for nearly three-quarters of sector revenues in 2016. The market is dominated by three companies: BJ’s Wholesale Club, Costco Wholesale and Sam’s Club (a division of Walmart).
- The US warehouse club sector grew at a 7.2% CAGR from 2001 through 2016. Its growth rate outpaced that of the total US retail industry by 3.3 percentage points over the period. The international market grew at an even brisker 10.8% CAGR.
- Yet the sector’s growth rate slowed over the same period, actually hitting zero in 2015. And researchers are forecasting that the US segment will grow at a 2.4% CAGR, more than 1.5 points lower than overall retail, from 2016 through 2020.
- The spoiler behind the sector’s decelerating growth rate has likely been e-commerce, which the clubs have been slow to embrace. Warehouse clubs currently generate 4% or less of their revenues from e-commerce.
- As is the case with many other retailers, warehouse clubs need to develop a strategy to compete with e-commerce players, as well as leverage their unique strengths to adapt to other demographic and technological changes.