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Warehouse clubs, a retail format expected to hit annual sales of $70 billion by 1998, have already spurred supermarkets to experiment with warehouse formats to blunt growing competition. Marketers also are giving clubs their due.
The pending merger of Costco Wholesale and Price Club will turn up the heat on marketers to deal on price, said Patrick McCormack, analyst with Dean Witter Reynolds. “Those two can cut better deals together than they could separately,” he said. McCormack added that the growing prowess of the clubs will also pressure more market- ers to consider EDLP strategies. “Those with EDLP pricing aren’t guaranteed a spot in the clubs, but (marketers) won’t get in without it.”
While the pressure on price is real, marketers also see clubs and hybrids as an opportunity. “We’re trying to play as many angles as we can; ultimately (hybrids) give more opportunities,” one food marketer said.
But retailers’ real pressure will come through private label. “Retailers are more and more committed to private label; that gives brand manufacturers no opportunity to compete on price,” said Jack Ryder, president of Cannondale Associates, a Wilton, Conn.-based consultancy. “They need to get away from price, price, price–those who succeed in the ’90s will be those with the most innovative ways to build brand franchises.”
“The whole notion of making a supermarket into a warehouse makes no logical sense,” said Douglas Tigert, marketing professor at Babson College. “Supermarkets’ best solution is to be the best supermarket they can be in town. “
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