Sam's beats Price Club to Mexico, at home, Sam's phases out free memberships - Club Aurrera, warehouse store in Mexico City

Discount Store News, Jan 6, 1992 by Arthur Markowitz

Sam's Beats Price Club to Mexico

BENTONVILLE, Ark. - Wal-Mart became the first U.S. retailer to open a wholesale club in Mexico when its joint venture with Cifra, N.A., the largest Mexican merchant, unveiled two Club Aurreras in Mexico City last month.

Wal-Mart beat the Price Club into Mexico, with the latter's initial Price Club de Mexico, a joint venture with Commercial Mexicana, another major Mexican retailer, due to open in Mexico City by the end of next month.

(Visits to Club Aurrera and Price Club de Mexico are part of the two-day "Opportunities in Mexico" program being sponsored by DSN/Deloitte & Touche in Mexico City Feb. 20 to 21.)

Wal-Mart's move south of the border came as its domestic membership warehouse subsidiary, Sam's Club, told group members it was phasing out the no-fee membership category effective this month. These members would now have to purchase $25 Advantage memberships to continue as Sam's Club members.

Sam's Club is the fourth major wholesale club to drop the no membership-fee group category, leaving only Pace Membership Warehouse still offering free memberships to group members.

Sam's Club ended 1991 with 208 units. The net gain of 60 clubs (which covers the acquisition of the 28-unit Wholesale Club chain), include Sam's Clubs that opened in five new states in the Northeast: Connecticut (Manchester); Delaware (Dover); Maine (Bangor and Scarborough); Maryland (Hagerstown) and New York (Greece and Henrietta.)

Last year the chain also planted clubs in Minnesota (via the Wholesale Club acquisition) and Nevada for the first time, raising to 35 the number of states where it has units.

This month the initial Sam's Club will open in Worchester, Mass., while the chain will enter New Hampshire later this year with units in Hudson and Seabrook. This will leave Vermont and Rhode Island as the only states in the 11 state region without any projected or operating Sam's Clubs.

The latest group of 24 Sam's Clubs opened in the fourth quarter averaged about 130,000 sq. ft., and most included fresh meat, produce and scratch bakery sections. A number of older Sam's Clubs, including the unit in Springdale, Ark., the membership warehouse closest to Wal-Mart's Bentonville headquarters, will be expanded this year to house these sections.

About 100 Sam's Clubs, or approximately one-quarter of the chain, are expected to have fresh produce and scratch bakery departments by year end.

The recent Sam's Club opening in the Philadelphia Franklin Mills complex, its third unit in the Greater Philadelphia area, saw informational picketing by United Food & Commercial Workers Local 1776. The local had also picketed Carrefour and recently ended a bitter labor dispute with Carrefour, which is on an outparcel at the complex.

The local noted in its flyer that one government official said that the "Franklin Mills, Northeast Philadelphia area is an economically blighted urban area. What then will it look like after Sam Walton and his predatory marketing policies has wiped out the remaining decent jobs in Northeast Philly?"

The local contended that the non-union Sam's does not create "good jobs" because employees "can be fired for any reason at any time." Despite the union's contention, Wal-Mart, and by extension its Sam's Club subsidiary, continues to enjoy a very positive image as one of the best companies to work for in America.

The chain is also phasing in IBM 4683 point-of-sale terminals that include a fixed upright scanner. Cashiers wear weight belts to help them avoid back problems when they lift bulky goods for scanning.

As for the two Club Aurreras, the initial unit, at 55,000 sq. ft., opened in a new building at 374 Ejercito Nacional in the Polanco district, an upscale residential, tourist and commercial area. The second, larger club, due to open at presstime, replaces a former drive-in on Periferico Norte in Ciudad Satelite, about two kilometers (about 1 1/4 miles) from the Price Club de Mexico in the same northwest Mexico City suburb.

The joint venture Club Aurrera, equally owned by the two companies which together made an initial $20 million investment, plans to open more clubs this year, at least another in Mexico City and up to five in Monterrey, a major industrial center in northeast Mexico.

Modeled on Sam's Club, Club Aurrera sells food and nonfood items. But the clubs are targeted to business customers, mainly suppliers who resell to small retailers. Cifra is a $2.2 billion diversified retailer, parent of five chains: Almacenes Aurrera food and clothing stores, Bodeguarerra discount stores, Superama supermarkets, Suburbia department stores and Vips restaurants.

Cifra, in fact, has emulated Wal-Mart in many of its operations. The top execs of both companies have long known each other and discussed common retailing problems and opportunities. Price Club's partner, Comercial Mexicana, is a $1 billion company.

Club Aurrera membership costs 75,000 peso or about $25. Sam's Club members can use their membership card to shop at Club Aurrera.