Is there anything that warehouse clubs can do to attract younger shoppers? Current trends show that consumers younger than about 50 years simply do not visit Costco, Sam’s Club, or other warehouse stores with the same frequency and willingness as older patrons. In response, the club stores have sought various solutions, trying different marketing tactics and assortment shifts to get younger people into their warehouses. Thus far though, little seems to be working, and the trends keep pointing in the same direction—a direction that does not offer much promise for the big retailers.
The main driver of these shifts is, of course, the growth of online shopping. Younger consumers looking for bulk products and larger packages of staple items prefer to have those items delivered to their homes, rather than visiting a vast store to find them. Accordingly, the demographics of shoppers in warehouse clubs diverge greatly from those of online grocery shoppers: older people in stores, younger people buying online.
Online retailers are working to make this choice increasingly easy for consumers as well. For example, Boxed does not charge any membership fee and delivers various grocery products. Initially, it was founded with the idea that its main market would be consumers for whom getting to a warehouse club was difficult, whether because the nearest one was too far away or because they did not have access to a car to drive to the store. But instead, the company has discovered that even people with cars who live close by a Sam’s Club or Costco order from it. Its popularity enabled it to earn $100 million in annual sales recently, 70 percent of it from repeat (young) customers.
This evidence also suggests that the shift toward online ordering has several drivers itself. In particular, time-pressed consumers want to take care of the chore of shopping for necessities during their lunch break or while riding the train to work. Few of them are willing give up several hours on a Saturday morning to wander the aisles of a warehouse club. That trip has long been a version of family-friendly entertainment, but young consumers (especially those without children) find little appealing about that way to spend their time.
Furthermore, warehouse clubs in general have been relatively slow to shift their offerings to match the demands of modern consumers. Only recently have they started adding popular product classes like organic foods and wine options. Although Sam’s Club has introduced online purchases that are available for in-store pickup, this option still requires consumers to make the trip to the store to gather their purchased items.
And all of those shifts are taking place, even before we add in the influence of Amazon. Although an annual Amazon Prime membership is more expensive ($99) than memberships at Sam’s Club ($55) or Costco ($65), it offers added benefits. Thus many consumers have substituted an Amazon Prime membership for their previous club membership, figuring that the extra fee is worth the convenience of free shipping and access to digital entertainment content, for example.
As a result of these trends, warehouse clubs are progressively disappearing from the landscape. Whereas the sector had added jobs every month between 2009 and 2016, as of 2017 it started regularly cutting employment rolls, meaning that the clubs had less need for employees. Furthermore, Walmart recently announced the closure of 63 stores, meaning layoffs for more than 10,000 workers.
But still the warehouse clubs remain optimistic, citing their expanded efforts to appeal to shoppers with their product assortments and value. As young consumers grow older and start families, perhaps they too will start spending Saturday mornings at the club—or maybe not. Two-thirds of them already have Amazon Prime memberships. Are they likely to change their minds now?
Discussion Questions:
- Do you shop at warehouse clubs? Why or why not?
- Do you agree with the contention in this article—namely, that Millennials will not support warehouse clubs in the future?
Source: Abha Bhattarai, Washington Post, January 27, 2018