Warehouse Clubs and Superstores Industry Profile

The US warehouse club and superstore industry (warehouse clubs) includes about 20 companies with some 4,000 stores and combined annual revenue of about $360 billion. Major companies include Sam's Club (Wal-Mart); Costco Wholesale; BJ’s Wholesale Club; and Meijer. The industry is highly concentrated: the top four companies hold over 90 percent of sales.

COMPETITIVE LANDSCAPE

Demographics and small business growth drive demand, and spending in warehouse clubs generally resists economic cycles. The profitability of individual companies depends on high volume sales, low-cost purchasing, and efficient distribution. Large chains dominate the market due to advantages in purchasing, distribution, and finance. The industry is capital-intensive: average annual revenue per employee is about $310,000.

Warehouse clubs have grown rapidly. Industry sales increased at an annual average rate of 35 percent between 1998 and 2008, compared to 16 percent for all general merchandise stores. The number of warehouse club stores more than doubled between 1998 and 2008, with expansion coming at the expense of grocery stores and department stores.

Warehouse clubs differ from superstores by requiring a membership to shop. Superstores typically offer a wide range of products, while warehouse clubs offer a limited selection. Both types of retailers sell products across many categories including food, and both compete with grocery stores, mass merchandisers, department stores, drugstores, specialty retailers, and wholesalers. Some retailers, such as Wal-Mart, operate warehouse and superstores as well as traditional discount stores.