It’s no secret that one of the most competitive corners of the retail industry is the grocery space.
This is partly because these stores have razor thin margins, so every dollar makes a difference.
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In order to stay competitive and attract the most customers, grocery stores must stock a lot of inventory to please a wide audience. But this also means taking on a high volume of liability — often with reduced shelf lives.
Walmart, for example, restocks its shelves every two days on average.
Plus, a lot of customers are very price-sensitive; they’ll notice when a grocery store changes its prices and get frustrated.
And since very few customers are brand-loyal, they’ll go to other stores in search of lower prices.
This means that in order to retain or attract customers, most grocery stores have to decrease their prices to stay relevant. Which makes for thinner margins.
On average, the typical grocery store has anywhere from between one to three percent profit margins. So there’s a lot of potential downside and very little room for error.
Large grocers help drive the market
Such competition can be great for customers, even if they are frustrated by the rising cost of groceries.
Some of the largest players in the space, which include Costco and Sam’s Club, operate using a slightly different model.
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The two warehouse grocers charge customers a recurring membership fee, which grants them access to the typically superior savings held within the brick and mortar spaces.
That’s because Sam’s Club and Costco buys their orders in bulk from suppliers, which affords them lower prices. They’re in turn able to charge their customers lower prices for inventory, since customers are also buying their goods in bulk.
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The two retailers also offer their customers other savings opportunities on things like gas and airlines.
It’s no wonder that Sam’s Club boasts about 69 million members and Costco has over 130 million.
Sam’s Club adding even more warehouse clubs
And while Sam’s Club is smaller than Costco in terms of locations and membership, it’s quickly gaining ground.
Sam’s Club has always been on the path of expansion, but it’s preparing to expand more rapidly, announcing that it intends to open 15 new stores annually.
This is an uptick from its ambitions just two years ago, when it announced it would open 30 new stores in five years.
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Sam’s Club has seen particular success as customers seek better value for their staple goods, like eggs, milk, paper products, and other consumer essentials.
“In times of plenty, we do well. But in tough times, we do really well,” CEO Chris Nicholas said.
Sam’s Club is also planning to renovate its fleet of about 600 total store locations.
“We’re expanding our reach through new clubs and remodels, with an eye toward omni engagement and speed. We will open the 30 new clubs we’ve shared previously, and I’m excited to share our plans to build a pipeline to 15 new clubs each year for the foreseeable future,” Nicholas said in a LinkedIn post.
Sam’s Club’s members are also rapidly growing. It saw 13% growth in Q4.
