Keep it simple, that's the Advantage; customer service, no fee and a diverse mix elevate club concept

Drug Store News, Oct 9, 1995 by Teresa Andreoli

No young, start-up company in its right mind would venture into the warehouse club industry, with its shrinking number of players and its past-peak growth opportunities. Sam's Club and PriceCostco own 89% of the $39 billion club industry, and within the past year, smaller players like Max Club (despite the deep pockets of its parent Super-Valu) and Wholesale Depot have called it quits as consolidation ravaged the sector.

Some innovative players, however, are confident that just the right amount of tweaking will bring profitability back to the business. Signs of club-like hybrids, such as warehouse-style discount stores with a new twist or adaptation, have begun to crop up around the country. For example, in Indianapolis, a group of veteran discount store and membership club executives launched 50below, a warehouse-style, frozen food-only club operation earlier this year.

More recently, Advantage, based in Farmingdale, N.Y., created a high-ceilinged, highly palletized 25,000-sq.-ft. store last summer that features a 50/50 mix of hard lines and food. Price and convenience, plus the lack of a club's traditional membership fee, are the two hooks that Advantage hopes will lure families from surrounding suburbs of Long Island's Suffolk County.

"The most common complaints we hear [from consumers about clubs] are that the lines are too long, the bulk packaging doesn't work for consumers, and that there is a lack of sales help," Advantage president Brian Robinson said. He also explained that club shoppers complained of spending a great deal more money than anticipated, which although it is wonderful news for clubs, could be a factor that would impede shopper frequency.

Twenty-seven-year-old Robinson, formerly a grocery buyer with Wise Buys, a now-defunct grocery/hard lines division of local discount chain Cheap John's (currently operating in Chapter 11 protection), hopes to offer residents something that the clubs, discounters and local grocers cannot.

Families are the focus of the price and convenience strategies Advantage has set. The new warehouse will stress severely discounted grocery offerings, a prominent toys section, a wealth of convenience foods and customer service superior to what clubs currently offer.

The initial unit, which opened in Port Jefferson Station in June, accepts MasterCard, Visa, checks and coupons. Store hours are from 9 a.m. to 10 p.m. on weekdays (10 a.m. to 6:30 p.m. on weekends), and the store provides baggers at the checkout to pack up shoppers' purchases. Two more sites opened in Shirley and Centereach in late September, and another two are scheduled for unnamed locations before the end of the year. All units will be contained within Suffolk County, N.Y., since the county has the highest annual food sales (about $1.8 billion) in the tri-state area, Robinson said.

To keep customers coming back, Advantage rarely prices any of its 2,200 skus above $25. The tags on food and select hard lines products are cut-throat, such as 15-oz. Fruit Loops for $1.77, 1/2-gal. of milk for 80 cents and a twin six-pack of Thomas' English muffins for $1.99. Some of the stock is close-out. but Robinson said other opportunistic buys help bring merchandise into the store.

The retailer has vet to delve into meat or produce. but Robinson said the company would be testing bagged onions and potatoes shortly.

In addition to Advantage's convenience-oriented foodstuffs - packaged frozen food, cereals, soups, snacks and other non-perishables - the miniwarehouse offers toys, stationery and greeting cards, health & beauty care products, household cleaners and seasonal merchandise. Prices in the general merchandise realm are somewhat more profit-protective, such as the $19.99 Stand 'N Store plastic storage unit and the $11.99 ToolBrute tool box, both from Flambeau, Middlefield, Ohio.

All merchandise included, the store operates on a 32% gross margin rate, Robinson said.

The layout of the store reflects Advantage's family-friendly mission. It is by no accident that toys and excitement-building seasonal supplies are poised at the store entrance.

"We call this the crying aisle," Robinson explained over the din of child reacting to his mother's reprimand. An endcap of Wacky Noodles ($3.99), 12-packs of PlayDoh ($6.99) and Franklin basketballs ($7.99) were some of the desirable elements causing a commotion near the store front.

The first two aisles lead back to a line of cold cases stocked with what Robinson labeled "kids' favorites," such as Hot Pockets ($2.06), Banquet dinners ($1.39) and Celeste pizzas. Weight Watchers frozen dinners and Cool Whip are other cold door elements.

A snack center with a Chip City display (stocked with Frito-Lay product) stands near the frozen food cases, which blends into the three middle aisles of Gibson-supplied greeting cards, H&BC, stationery and medicinal items.

Household items like laundry detergent and aluminum wrap are stocked in cut-open cardboard cases in aisle six.

The last three aisles shelve kitchen cupboard standbys, like soups, canned goods (such as Chef-Boy-Ar-Dee favorites), candy (a floor display of various Hershey's 1.55-oz bars sold for 5/$1) coffee, tea and bottled beverages (20-oz. Arizona teas $.77) and fruit juices.