However, by having many stores in the same geographic area, one store may cannibalize the sales of another store. Furthermore, BJs doesn't have quite the economies of scale that its competitors enjoy. Scale is very important in the warehouse business, because margins are extremely thin, and low costs and high volumes are necessary for staying profitable. Also, while Costco and Sam's Club focus on small-business customers, BJ's focuses on retail shoppers, by offering more grocery items and smaller packaged goods.
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. 
BJ's revenues in 2006 grew by 7.2% over 2005. However, Operating Income was negatively impacted by lower sales and margins, especially in higher margin departments such as jewelry and furniture. The company also had more holiday season markdowns in 2006, compared to 2005.
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. 
BJ’s private brand consumer products are generally are priced well below the top branded competing product, but still carry higher margins for the company. At the end of 2006, BJ's private brand products had achieved a sales penetration of approximately 13% of food and general merchandise sales. The company expects its private brand products to continue to represent an increasing percentage of sales over time, which may help margins. Sam's Club and Costco Wholesale (COST) have also launched their own private brands in their stores.
BJ's has grown over the years by opening many stores on the East Coast. Since 2001, BJ’s has grown from 118 clubs to 172 clubs in 2007. Opening more stores will make it more convenient for customers to find BJ's locations and contribute to more memberships. BJ's expansion may lead to more memberships in the long run, but could immediately hurt sales of already existing BJ's clubs due to overlapping markets. If BJ's can strategically open new clubs in areas where clubs do not exist, or where the competition isn't well established, BJ's will gain market share and more memberships. On the other hand, if BJ's opens new clubs near already existing BJ's clubs, the new clubs will steal sales from old clubs, or cause cannibalization.
The retail industry as a whole is vulnerable to economic conditions. An economic downturn in the US would have a negative impact on BJ's revenues. In a down economy, shoppers tend to spend less money on discretionary goods such as jewelry and electronics. One counteracting force is that nearly 60% of BJ's revenues come from food, which is not affected very much by economic cycles. In particular, BJ's caters to middle income and value-conscious shoppers, who may be more vulnerable to economic cycles.
The wholesale club market has two big players in Sam's Club and Costco Wholesale (COST), which have more an combined 90% market share. While BJ's has remained focused on the East Coast, Costco has taken away market share from Sam's Club by opening new clubs throughout the Midwest and the South over the past years.
The wholesale club market is fiercely competitive and margins are thin. All three companies charge their members an annual membership fee.
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