Dive Brief:
- A new report says BJ’s Wholesale Club warehouse chain is closing the gap between grocery store and bulk-shopping store by offering more fresh or perishable food and smaller items to increase traffic to its stores. Around 20% of the East Coast-based chain’s members make weekly visits, Business Journal reports.
- According to analysts from financial holding group Nomura, BJ’s fresh food section makes up 27% of its sales. At competitor Costco, by contrast, the fresh food section makes up 16%. In general, the biggest warehouse chains in the U.S. — Costco, BJ’s and Sam’s Club — all use the same concept: provide lower prices to members by selling items in bulk. BJ’s focus on fresh food items, however, seems to be bringing customers through the doors more frequently. Once customers are in the store, members are more likely to make other purchases, the report found.
- Business Journal further notes that the three members-only box stores use similar tactics to attract customer visits with their gas stations. As gas buys tend to be recurring, having gas stations nearby is a good way to increase foot traffic and encourage members to visit when they fill the tank. Fuel rewards and other incentives can also build customer loyalty.
Dive Insight:
While Costco is king among the bulk warehouse chains, BJ's is trying to make a move up the ranks with its recent changes. Currently it trails behind Costco and Sam's Club in both number of stores and members, but Walmart's recent decision to close 63 of its Sam's Clubs may offer the more regional BJ's a chance to pick up steam among customers who prefer bulk buying.
BJ’s executives have also been looking for ways to boost sales by improving the customer experience online and in stores. The company recently updated its website to showcase featured products, top categories, personalized recommendations and seasonal solutions. With the new look comes "Shop BJs.com — Pick Up in Club" feature, according to a press release. Club members can purchase items at bjs.com and pick the order up in two hours at any of the retailer’s locations for free. The store has also launched "Add-to-Card" coupons, which can now be applied to online orders. Previously these digital coupons could only be redeemed at a club check stand. In addition to its own site, the company recently introduced separate websites for two of its private labels, Berkley Jensen and Wellsley Farms.
Digital improvements also seem to be a focus, with the use of Instacart for same-day delivery, as well as a test of BJ’s Express Scan in seven locations. The mobile checkout app is similar to those used by other retailers like Meijer, Sam’s Club, Walmart and Amazon Go.
As for fresh food items, BJ’s President and CEO Chris Baldwin told CNBC in November the store has made that segment a priority in order to attract customers who want to buy healthier foods for their families at discounted prices. He said he expects to see the fresh foods department grow as customers are drawn in.
Then there’s its recent IPO. Leonard Green and CVC Capital acquired BJ's Wholesale Club in 2011, took it private and have paid investors dividends several times since. Unloading BJ’s could make sense for them — most often private equity investment is made with the goal of getting the money back out, with profits, within five years or so. For BJ's then, the time is more than ripe. But a sale has proven difficult. Last year Amazon was said to be interested in the business, which would have garnered the e-commerce giant a well-placed national brick-and-mortar footprint, but Whole Foods was the target of that instead.
The urgency of the retailer's owners doesn't necessarily serve the business itself, however. Leonard Green and CVC Capital Partners have taken a series of payouts from the warehouse retailer's debt coffers, bringing the total to some $1.8 billion in their five years of ownership and bumping the debt-to-earnings ratio to unhealthy levels, according to a Bloomberg report last year. Walmart’s sale of 63 stores factored into the Moody's Investors Service’s recent assessment that the planned IPO could mitigate the company's debt.
