Warehouse Clubs Case

The case about “The Club Wars” is a study about an establishment which is known by name Sam’s Club. This company was formed in 1976 which operates through an airport hangar converted into a price club in San Diego. By 2002 more than 1000 stores were opened and operated worldwide. These clubs offered their members the lowest possible price and the best merchandise purchasing experience. More companies were coming into the warehouse retail market in the late of 20th century, but two most dominating companies were Sam’s Club and Costco. The target of the companies was to offer the lowest possible prices of supply chain and best deals on the products to their members.

Market players generally have a wide variety of potential customers, which considerably weakens buyer power. Although consumers in this industry may be loyal to particular brands or chains, loyalty to retailer brands is arguably less important than competitive pricing. Many supermarkets run rewards programs for frequent shoppers, such as Tesco’s ‘Clubcard’, and these schemes can help companies retain customers and reduce buyer power.

"Why do some stores charge membership fees and have lower prices on goods, rather than letting everyone in the store and charging higher prices?" (By Maya Wawi)

Answers must be posted to Compass. You may work in groups of no more than four people. Be sure to

The cult following for Trader Joe’s distinguishes it from its competition. This cult is projected to grow as upcoming generations become more and more price sensitive. Loyal shoppers will camp out overnight for a grand opening or, in one example, write 50 letters to the headquarters pleading for a store opening in their state. This is surprising because their target shopper, Millennials, “show little retailer loyalty” when it comes to where they get their groceries. Trader Joe’s has obtained this loyalty through their Every Day Low Pricing Strategy, constantly changing inventories, and superb store environments.

The Key Issues to be observed in this case include a look at why Costco has grown to be the discount retail warehousing sales leader and the strategic actions they have taken to achieve this market Position. First, the study will involve an analysis of the industry’s driving forces and the key success factors in the industry in order to obtain an understanding of the discount retail warehousing industry. The study will then perform a SWOT analysis of Costco and its environment with the objective of identifying the opportunities and threats faced by Costco and the strengths it has to help them seize and overcome them. This will allow for an analysis of the company’s strategy for continued growth in the future.

Studying the demographics, such as education and food and cooking magazine subscriptions places stores in the right place to achieve profits (Tobak, 2010). As stated in our textbook, “Winning strategies enable a company to achieve a competitive advantage over key rivals that is long lasting” (Crafting and Executing Strategy: Concepts and Readings, 2016, p. 12). Offering excellent customer service not found anywhere else, along with their private labeled products continues to differentiate Trader Joe’s and give them a competitive advantage over their

Costco’s mission is, “To continually provide our members with quality goods and services at the lowest possible prices” (Costco.com, 2018). With the Costco mission in mind, their strategy was essentially simple in terms of marketing segmentation. Originally, Price Club started with a strategy of selling goods to the small business market, but branched off and began selling to selected non-business owners. As the world's first membership warehouse club, the strategy was simple and lucrative. After the two companies merged, Costco continued with the strategy of the membership warehouse club.

Potential new entrants into the market are a low threat for Costco. We have the advantage of economies of scale and having learned by doing. Our economies of scale come from better management coordination of processes, long term relationships with our suppliers, and enhanced employee performance with low turnover (Pearce et al., p. 100). The cost for a new entrant would be significant given the capital investment required to start up a warehouse business. Any

Costco’s business model is to generate high-volume sales and rapid inventory turnover by offering low prices on a limited set selection of brands and a few selected privately labeled products. This model does not turn a profit on its own with the company operating slightly below its break-even cost. However, to make up for this Costco charges a membership fee and this is a simple way of padding their profit but also enabling them to provide a customer experience that emphasizes value.

Founded by J.W. Nordstrom in 1880 as a small shoe store, by 1995 Nordstrom had become a giant retailer with net earnings of $203 million and over 35,000 employees. Nordstrom remains a family operation to date. The idea of the ‘Nordstrom Way’ - with strong commitment to the firm, emphasis on proactive service, no external hiring, and a decentralized management structure (e.g., Nordstrom has no CEO) - is central to their employee relations, and is seen as central to their success. Average compensation within the company is above industry average.

2. Compares the returns of the asset to the market over a period of time (Beta)

The salespeople in the departmental shop are highly confident about the high-end merchandise offers and being sufficient in excellence, with qualities of these products on the tip of the tongue (Cravens, & Piercy., 2013). Customers like to test new materials and great manufacturers and price innovation so that it can be a great opportunity in concerns of sales and revenue. In essence, new clients want guidance and another strategy to promote excessive-end merchandise. In manual methods for customers in creating an association, affiliation among needs and fulfillments and all of these strategies primarily base on the shopping of nature for the customers because spending on behavior may have an excessive effect on the future purchases (Cravens, & Piercy., 2013). In the excessive-end alternative challenges and concerns in a department store with the boom in prices and regards to the entire product section, but to restrict to a selected segment or a few specific segments. First-rate is a contributing element that should omit at any degree and grow a distinction in retail outlets regarding offerings provided by free delivery, online marketing, online advertisement, and trade (Cravens, & Piercy., 2013). The cost leadership alternative is a comprehensive company method for local corporations that rely on the entire industry as opposed to a selected market section, in which the company recommends the lowest charges inside the marketplace to secure a substantial

Late in February 1993, Colin Power, majority owner of Athlete's Warehouse and a number of other companies in Grand FallsWindsor, and a human resource consultant from the Small Business Centre were seated in Colin's office in the back of Athlete's Warehouse. Cohn was speaking to his brother Ed on the phone. "'Sorry I can't run with you today, I'm all tied up. How about tomorrow morning at 7:00?" Hanging up the phone Colin exclaimed to the Small Business Centre consultant "for the last year I haven't had time to turn around. Every day it is just a rush from one store to another, phone calls all day long and never enough time to do the things that need to be done. I need someone else to help run things, but I don't

The use of membership programs is an international phenomenon and has been growing in the profit and non-profit sectors (Slater, 2005). Many organizations have utilized membership programs to encourage or facilitate interaction and collaboration with their current consumers, as well as to promote and recruit new ones. As important competitive marketing tools, tens of thousands of membership programs with millions of members exist in a variety of settings, including museums, galleries, zoological and botanical gardens, theaters, and other cultural heritage-related attractions, and at festivals and events (Klenosky, Oh, Panek, & Luebke, 2008; Olsson, 2010; Slater, 2005).