BJ's Wholesale Club (BJ)

TOP CONTRIBUTORS

Krishna K

Erik Espinoza

Geoffrey Jordan

Business Overview

BJ's introduced the warehouse club concept to New England in 1984 and has expanded throughout the eastern United States. At the beginning of 2007, BJ’s operated 172 warehouse clubs in 16 states. ^[1]

BJ's makes money by selling a wide range of food and general merchandise items, gasoline (at select BJ's locations) and from membership fees. ^[2]

• Food accounted for approximately 60% of BJ’s total food and general merchandise sales in 2006. Food categories at BJ’s include frozen foods, fresh meat and dairy products, beverages, dry grocery items, fresh produce and flowers, canned goods and household paper products.

• General merchandise, the remaining 40%, includes consumer electronics, small appliances, tires, jewelry, health and beauty aids, household needs, computer software, books, greeting cards, apparel, furniture, toys and seasonal items. ^[3]

• Membership Fees: BJ's had approximately 8.7 million BJ’s members (including supplemental cardholders) at the beginning of 2007. These members generally pay a $45 annual membership fee to be able to shop at BJ's. BJ’s also offers an $80 Rewards Membership program for high-frequency/high-volume members, which offers a 2% rebate, capped at $500 per year, on all purchases. ^[4]

Key Trends and Forces

Private Label

BJ’s private brand consumer products are generally are priced well below the top branded competing product. At the end of 2006, BJ's private brand products had achieved a sales penetration of approximately 13% of food and general merchandise sales on an annualized basis. The company expects its private brand products to continue to represent an increasing percentage of sales over time.

Market Share

Competition

The wholesale club market is fiercely competitive and margins are thin. BJ's main competition is Sam's Club and Costco Wholesale (COST). Costco has taken away market share from Sam's Club by opening new clubs throughout the Midwest and the South over the past years, which was previously dominated by Sam's Club.

Reference

1. ↑ BJ 10k 2006, Pg 2
2. ↑ BJ 10k 2006, Pg 13
3. ↑ BJ 10k 2006, Pg 4
4. ↑ BJ 10k 2006, Pg 5