Clubs beware: a lesson looms in NE - warehouse stores, northern New Jersey - editorial

Discount Store News, Sept 2, 1991 by Tony Lisanti

Clubs Beware: A Lesson Looms in NE

As previously reported in DSN, the explosive growth of the warehouse club segment that took place in California just a few years ago, will soon be duplicated in several states in the lucrative Northeast corridor.

An area worth watching is northern New Jersey because what occurs here is likely to occur elsewhere in the region. There may well be a lesson waiting to be learned.

Contrary to conventional wisdom, this market is different. And Price Club, which is opening in late September in Wayne, N.J., and Sam's Club, which is opening later this year in Paramus, N.J., will quickly discover the differences.

This New York suburb is one of the most densely populated areas in the United States. It has one of the highest income as well as one of the lowest income areas and it has a plethora of small businesses which exist at virtually every corner. The bad news is that it is one of the most competitive markets that the warehouse clubs have ever faced. And it houses some of the nation's most sophisticated, demanding and fickle consumers and business people.

A strong competitor the warehouse clubs will face are the many convenient, aggressive, well-established supermarket chains such as ShopRite, operated by the Wakefern Food Corp. ShopRite has begun to merchandise large size and multipacks at sharp prices. In a recent circular, a variety of "giant-sized values" were promoted including a 120-ounce container of Downy Liquid priced at $3.99; the same item sold at Sam's for $4.49. ShopRite has also formed its own membership club called "Price Plus." This club enables customers to receive additional savings on selected products.

Does this mean the clubs will not be successful in the Northeast? No, but they will face their greatest challenge to date, particularly among the individual member, which comprises a bigger, more important constituency than many club execs care to admit. It will take some creative merchandising and even more aggressive pricing for them to grab a slice of the pie.