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Warehouse Clubs - US - June 2017

"Warehouse clubs have been successful of convincing a large amount of people to pay an annual fee to shop at their stores. Sales continue to increase YOY (year-over-year) and the forecast ahead looks bright. These consumer advocates find that, based on their shopping habits and needs, the value they receive in benefits outweighs the fee, which works well for them. However, the warehouse club model is not for everyone. Membership requirements, fees and bulk-sized products remain the main barriers for nonshoppers. There remains a large “middle ground” however: consumers who are not current members but have a higher than average likelihood to be converted. Nearly half of nonshoppers are open to shopping the channel in the future but many think they can get everything they need elsewhere. Warehouse clubs should focus on trial tactics to drive acquisition, easing consumers in via free trial periods or shorter commitment windows."
- Diana Smith, Associate Director - Retail & Apparel

This Report discusses the following key topics:

  • Overall growth predicted, but pace of growth may slow
  • Membership requirements do not protect warehouse clubs from outside competition
  • Membership fees remain a key barrier 
  • Bulk buying does not have universal appeal

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Table of contents

  1. Overview

    • What you need to know
      • Definition
      • Executive Summary

        • The issues
          • Overall growth predicted, but pace of growth may slow
            • Figure 1: Total net sales and fan chart forecast of leading US warehouse club stores, at current prices, Fiscal years 2012-22
          • Membership requirements do not protect warehouse clubs from outside competition
            • Membership fees remain a key barrier
              • Figure 2: Reasons for not shopping the channel, by generation, March 2017
            • Bulk buying does not have universal appeal
              • Figure 3: Shopping barriers related to bulk buying, March 2017
            • The opportunities
              • Boost e-commerce
                • Figure 4: Method of shopping, March 2017
                • Figure 5: Online shopping interests and behaviors, by generation, March 2017
              • Improve speed at checkout and product selection
                • Figure 6: TURF Analysis – Desired improvements, March 2017
              • Tap into satisfied current members as brand ambassadors
                • Figure 7: Reasons for shopping the channel, March 2017
              • What it means
              • The Market – What You Need to Know

                • Sales continue on an upward path
                  • Increases in consumer confidence and household income bode well for the sector
                    • Warehouse clubs not protected from outside competition
                    • Market Size and Forecast

                      • The future looks good
                        • Figure 8: Total net sales and fan chart forecast of leading US warehouse club stores, at current prices, fiscal years 2012-22
                        • Figure 9: Net sales at US warehouse club stores, at current prices, fiscal years 2012-22
                    • Market Perspective

                      • Are warehouse clubs losing some exclusivity?
                        • Figure 10: Big Bargain Buys selection at Mariano’s, Chicago, May 2017
                    • Market Factors

                      • Consumer confidence and unemployment levels set records
                        • Figure 11: Consumer confidence and unemployment, 2008-March 2017
                      • Household income slowly climbs upward
                        • Figure 12: Median household income, in inflation-adjusted dollars, 2005-15
                        • Figure 13: Household income distribution by race and Hispanic origin of householder, 2015
                      • Shopping incidence increases with household size
                        • Figure 14: 2016 Households by percentage of members vs any warehouse club shoppers, by household size, March 2017
                        • Figure 15: Average number of people per household, by race and Hispanic origin, 2016
                      • Less space in the home presents an issue for bulk-sized products
                        • Not all households are the same
                          • Figure 16: Distribution of households, by type of household, 2016
                      • Key Players – What You Need to Know

                        • Costco leads the category
                          • BJ’s reportedly for sale
                            • Non-food categories such as beauty and apparel represent opportunity
                              • E-commerce not a main priority
                              • What’s Working?

                                • Category dominated by two major players
                                  • Figure 17: Net sales at US warehouse club stores, at current prices, by segment, fiscal years 2012-16
                                  • Figure 18: Global sales distribution by product category, fiscal year 2016
                                  • Figure 19: Costco bedding and jewelry inventory, Chicago, May 2017
                                  • Figure 20: Net sales at Costco, fiscal years 2011-16
                                  • Figure 21: Total global membership fees at Costco, fiscal years 2011-16
                                  • Figure 22: Global sales distribution by product category, FY 2015
                                  • Figure 23: Net sales at Sam’s Club, fiscal years 2011-17
                              • What’s Struggling?

                                  • BJ’s Wholesale Club reportedly for sale
                                      • Figure 24: Net sales at BJ’s, fiscal years 2014-16
                                    • Opportunity for beauty and clothing improvements
                                      • Figure 25: Costco apparel department, Chicago, May 2017
                                      • Figure 26: Sam’s Club apparel department, Chicago area, May 2017
                                  • What’s Next?

                                    • Where does e-commerce fit in?
                                      • E-sampling extends a beloved in-store experience online
                                      • The Consumer – What You Need to Know

                                        • Warehouse clubs gain traction
                                          • Core shoppers are young, affluent, and likely to be parents
                                            • Household memberships are the most common
                                              • Member satisfaction is high
                                                • Membership fees and bulk-sized packages main barriers
                                                  • Faster checkout and improved production selection key opportunities
                                                  • Changes in Shopping the Channel

                                                      • Nine out of 10 shopping more or the same
                                                        • Figure 27: Changes in shopping the channel, March 2017
                                                      • Men shopping more than women
                                                        • Figure 28: Changes in shopping the channel, by age and gender, March 2017
                                                      • Those who shop more also have more income
                                                        • Figure 29: Changes in shopping the channel, by household income, March 2017
                                                      • Significant share of Hispanics shopping more
                                                        • Figure 30: Changes in shopping the channel, by race and Hispanic origin, March 2017
                                                    • Retailers Shopped

                                                        • Costco maintains a competitive edge
                                                          • Figure 31: Retailers shopped, March 2017
                                                        • Demographic patterns emerge
                                                          • Figure 32: Costco shoppers, by key demographics, March 2017
                                                          • Figure 33: Sam’s Club shoppers, by key demographics, March 2017
                                                          • Figure 34: BJ’s Wholesale Club shoppers, by key demographics, March 2017
                                                        • Shoppers look to warehouse clubs to stock up but also for fill-in needs
                                                          • Figure 35: Shopping frequency, by retailers shopped, March 2017
                                                        • BJ’s seeing higher shopping rates of late
                                                          • Figure 36: Changes in shopping the channel, by retailers shopped, March 2017
                                                      • Types of Membership

                                                          • Household memberships most common
                                                            • Figure 37: Types of membership, March 2017
                                                            • Figure 38: Membership type repertoire, personal or business membership, March 2017
                                                        • Reasons for Shopping the Channel

                                                            • Price/value relationship in check for satisfied shoppers
                                                              • Figure 39: Reasons for shopping the channel, March 2017
                                                            • Keep up the sampling
                                                              • Figure 40: Percentage of consumers who like the samples warehouse clubs offer, by age, March 2017
                                                            • Multicultural segments appreciate the no-frills, one-stop shopping aspects
                                                              • Figure 41: Reasons for shopping the channel, by race and Hispanic origin, March 2017
                                                          • Reasons for Not Shopping the Channel

                                                              • Membership fees remain the biggest barrier
                                                                • Figure 42: Reasons for not shopping the channel, March 2017
                                                              • Bulk buying is not for everyone
                                                                • Figure 43: Barriers related to shopping in bulk, by household size, March 2017
                                                                • Figure 44: Costco, select bulk-sized packaged goods, Chicago, May 2017
                                                              • Some shoppers think warehouse clubs can’t meet their shopping needs
                                                                • Figure 45: Shopping barriers related to grocery and household goods selections, by age, March 2017
                                                              • Half of non-shoppers are open to shopping the channel
                                                                • Figure 46: Reasons for not shopping the channel, by openness to shopping the channel, March 2017
                                                            • Shopping Behaviors

                                                                • Women browse aisles while men take more of a direct route
                                                                  • Figure 47: General shopping behaviors, by age and gender, March 2017
                                                                  • Figure 48: Costco Kirkland brand vs Nestle name brand product comparison, Chicago, May 2017
                                                                • Food courts offer a nice treat
                                                                  • Figure 49: Store sections shopped, by gender and age, March 2017
                                                                  • Figure 50: Sam’s Club food court, Chicago area, May 2017
                                                                • Mobile app usage remains low
                                                                  • Figure 51: Other services used, by gender and age, March 2017
                                                              • Desired Improvements

                                                                  • Biggest source of sales is also the biggest opportunity area for improvement
                                                                    • Figure 52: Desired improvements related to product selection, March 2017
                                                                  • The lines are too long
                                                                      • Figure 53: Desired improvements related to shopping efficiency, March 2017
                                                                      • Figure 54: Costco in-store layout, Chicago, May 2017
                                                                      • Figure 55: Sam’s Club In-store signage, Chicago area, May 2017
                                                                    • TURF analysis further explores areas of opportunity to maximize reach
                                                                      • Figure 56: TURF Analysis – Desired improvements, March 2017
                                                                  • Appendix – Data Sources and Abbreviations

                                                                    • Data sources
                                                                      • Sales data
                                                                        • Fan chart forecast
                                                                          • Consumer survey data
                                                                            • Abbreviations and terms
                                                                              • Abbreviations
                                                                              • Appendix – The Market

                                                                                  • Figure 57: Net sales at US warehouse club stores, at inflation-adjusted prices, 2012-22
                                                                                  • Figure 58: Household income distribution, 2005-15
                                                                              • Appendix – Key Players

                                                                                • Category information
                                                                                  • Figure 59: Net sales at US warehouse club stores, at current prices, by segment, 2012-16
                                                                                • Costco information
                                                                                  • Product category descriptions
                                                                                      • Figure 60: Costco store count, fiscal year 2011-16
                                                                                    • Sam’s Club information
                                                                                      • Product category descriptions
                                                                                          • Figure 61: Sam’s Club store count, fiscal year 2011-16
                                                                                      • Appendix – The Consumer

                                                                                        • Membership information
                                                                                          • Costco
                                                                                              • Figure 62: Costco membership types, 2017
                                                                                            • Sam’s Club
                                                                                              • Figure 63: Sam’s Club membership types, 2017
                                                                                            • BJ’s
                                                                                              • Figure 64: BJ’s membership types, 2017
                                                                                            • Additional information
                                                                                              • Figure 65: Items purchased at warehouse clubs, August 2016
                                                                                              • Figure 66: Membership type repertoire, any primary membership,* March 2017

                                                                                          Companies Covered

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                                                                                          Warehouse Clubs - US - June 2017

                                                                                          US $3,995.00 (Excl.Tax)