Warehouse Clubs Research Articles

Exploring the impacts of ecommerce activities on the spatial resilience of warehouse clubs: the role of retail agglomeration

PurposeAs ecommerce becomes more prevalent, traditional brick-and-mortar retailers such as warehouse clubs (WCs) face the challenging task of maintaining and growing their customer base. This study aims to unravel the combined impact of retail agglomeration and ecommerce activities on consumer foot traffic (also referred to as “footprint”) at WC stores, placing an emphasis on the locational strategies adopted by WCs in this evolving retail landscape.Design/methodology/approachMobile-based customer foot traffic data for Costco, a major U.S. WC chain, is sourced for our analysis. We use Principal Component Analysis (PCA) to identify dimensions of general merchandise (GM) and narrow-range merchandise (NM) retail agglomeration. Two-stage least squares (2SLS) regressions are used to explore how the intensity of ecommerce activities and WC locational choices within retail agglomerations impact WC foot traffic.FindingsOur analysis highlights a notable decline in WC store visits attributable to both GM and NM ecommerce activities, with GM ecommerce presenting a more significant competitive challenge to WCs. Regarding retail agglomerations, proximity to GM clusters that include a diverse range of supercenters, department stores, and club stores, is associated with an increase in WC customer visits within their vicinity. In contrast, the influence of NM agglomerations is mixed; clusters adjacent to grocery stores lead to higher WC customer traffic compared to those focused on other specialized stores. These findings underscore the strategic importance of location in mitigating the adverse effects of ecommerce competition. Additionally, our study uncovers intricate dynamics between GM and NM retail clusters and ecommerce activities, demonstrating varied impacts on WC customer footprint.Research limitations/implicationsAccess to customer footprint data illustrates the potential of this data source for retail decision making and researchers. Our analysis is limited to one chain, notably Costco.Practical implicationsOur findings underscore the need for retailers to adeptly navigate the evolving retail landscape, including the confluence between physical and digital retail environments, to secure future success. In particular, our results emphasize the benefits of locating stores within mixed retail agglomerations and underline the need to consider the broader retail landscape in location decisions.Social implicationsThe rise of ecommerce in the U.S. has reshaped consumer behavior and altered local shopping districts’ communal dynamics. This change may spur policy interventions to help physical stores compete with online retailers, emphasizing the importance of retail diversity and community-centric environments to sustain communal retail interactions amidst digital advancements.Originality/valueThe paper makes use of a unique dataset to provide a first assessment of the combined effects of retail agglomeration and ecommerce activities on consumer foot traffic for WC retailers. Thus, this paper provides insights into the impacts on consumer shopping behavior from the dynamic interactions between physical retail clusters and online shopping behaviors.

Changes in retail tobacco product sales and market share among retail payroll establishments in the U.S. Economic Census between 1997 and 2017

The tobacco industry spends the vast majority of their marketing and promotional budget at retail outlets. However, few studies have used publicly available data to examine trends in the number and types of retail establishments where tobacco products are sold. Using the U.S. Economic Census for 1997, 2002, 2007, 2012 and 2017 (the latest year), we examined the number, type, and sales of payroll establishments selling tobacco products. Nine store types accounted for 94% – 99% of tobacco product sales between 1997 and 2017. Gas/convenience stores had the greatest market share (33% – 49% of tobacco sales). The number of warehouse clubs selling tobacco quadrupled; however, market share only increased from 9.6% to 10.3%. Supermarkets experienced the largest decrease in percent of stores selling tobacco. Pharmacy tobacco sales increased in 2012 then decreased in 2017; per store sales volume more than doubled between 1997 and 2012. Online shopping accounted for less than 1% of the market share between 1997 and 2012, but rose to 6.3% in 2017. Between 1997 and 2017, consumers shifted where they purchased tobacco products. Declining tobacco sales in supermarkets is a promising trend for consumers seeking healthy food without exposure to tobacco product marketing; however, the consistently large number of tobacco retailers, and thus widespread tobacco availability, is concerning. Consumer tobacco purchase changes over time support the case for point-of-sale policies that affect different retail types, including pharmacy bans, to reduce tobacco retailer density. Additionally, the rapid shift to online tobacco purchasing in 2017 identifies a new target for enhanced regulation and enforcement.

Improving supply quality through the store-initiated returns in wholesale supply chains

Problem definition:Retail stores often offer a return policy. However, not all customers choose to return the product when they are not satisfied. To improve the store’s brand value and reputation, offering store-initiated returns (SIRs) is an innovative practice for retailers, especially warehouse stores. With SIRs, customers are notified by a store that they can return items for a refund regardless of their satisfaction status. Academic/practical relevance:In this study, we investigate how SIRs affect the quality decision and the supply chain partners’ profits and discuss how customers’ decisions affect the implementation. Methodology:We formulate the problem as an inventory model with a single store and a single supplier. Results:When the warehouse club has the power to utilize the SIR option, the supplier generally has a stronger incentive to supply items of higher quality. However, in some specific scenarios where customers are significantly more sensitive to product quality and with a higher product return rate, the supplier can adversely choose to supply products at a lower quality level to lower the cost. In terms of profit, we show that the warehouse club’s profit is usually higher when the ability to initiate the SIR is available. In contrast, the supplier always earns a lower profit when the SIR option is available to the wholesale club. To reduce the reverse logistic cost, we also investigated the costs and benefits of utilizing a gift card option instead of a passive cash refund. We find that when the expected cost of the items purchased with the gift card is lower than the total loss from the SIR, a feasible cost-sharing scheme always exists such that both the supplier and the store benefit from the gift card option. Managerial implications:These results provide valuable insights into the potential benefits and issues that stores may face when implementing SIRs to improve customer satisfaction. It demonstrates the possibility of increasing product quantity and customer satisfaction with SIR strategy.

Fruit and Vegetable Shopping Behavior and Intake among Low-Income Minority Households with Elementary-Aged Children.

Low-income children and families do not meet the recommendations for fruit and vegetable (FV) intake. This study aimed to assess the association between FV shopping behavior and child FV intake through a cross-sectional study design analyzing self-reported surveys (n = 6074) from adult-child dyads of Hispanic/Latino and African American participants enrolled in the Brighter Bites co-op program. Through quantitative mixed effects linear regression models, accounting for school-level clustering and adjusting for covariates, child FV intake was positively associated with shopping for FV at large chain grocery stores (p < 0.001), natural/organic supermarkets (p < 0.001), warehouse club stores (p = 0.002), discount superstores (p < 0.001), small local stores/corner stores (p = 0.038), convenience stores (p = 0.022), ethnic markets (p = 0.002), farmers’ markets/co-op/school farm stands (p < 0.001), and gardens (p = 0.009) among Hispanic/Latinos participants. Among African American participants, there was significant positive association between child FV intake and shopping for FV at natural/organic supermarkets (p < 0.001), discount superstores (p = 0.005), and convenience stores (p = 0.031). The relationship between location and frequency of shopping for FV and child FV intake varied between races. Further research is needed to better understand the influence of cultural and physical environmental factors. Nutrition education programs are vital to encouraging families to make healthier food choices and purchases to improve child FV consumption.

Specialty Crop Consumer Preferences for Product Characteristics and Marketing Channels

Little research has studied consumer preferences for product characteristics and marketing channels in combination. We survey 938 specialty crop consumers in Missouri to inform preferences for 21 specialty crop products, six attributes (local, organic, GMO-free, pesticide-free, appearance, price), and four marketing channels (direct-from-farm, farmers market, warehouse club, grocery store). We observe that local and pesticide-free attributes are significantly more important than organic and GMO-free attributes to Missouri specialty crop consumers. Consumers who prefer local and pesticide-free characteristics are more likely to buy food from direct marketing channels price-oriented consumers are more likely to buy food at the grocery store.

Using Machine Learning to Compare the Information Needs and Interactions of Facebook: Taking Six Retail Brands as an Example

This study explores the interactive characteristics of the public, referencing existing data mining methods. This research attempts to develop a community data mining and integration technology to investigate the trends of global retail chain brands. Using social media mining and ensemble learning, it examines key image cues to highlight the various reasons motivating participation by fans. Further, it expands the discussion on image and marketing cues to explore how various social brands induce public participation and the evaluation of information efficiency. This study integrates random decision forests, extreme gradient boost, and adaboost for statistical verification. From 1 January 2011 to 31 December 2019, the studied brands published a total of 25,538 posts. The study combines community information and participation in its research framework. The samples are divided into three categories: retail food brand, retail home improvement brand, and retail warehouse club brand. This research draws on brand image and information cue theory to design the theoretical framework, and then uses behavior response factors for the theoretical integration. This study contributes a model that classifies brand community posts and mines related data to analyze public needs and preferences. More specifically, it proposes a framework with supervised and ensemble learning to classify information users′ behavioral characteristics.

What Happened to the Hand Sanitizer? Retail Operations in an Uncertain World

We use panel data to examine consumer purchasing and retail management of an essential product, hand sanitizer, during eight seasonal flu epidemics and the 2009-2010 swine flu pandemic. Data are gathered on the severity and spread of flu symptoms across the United States and on sales, assortment, and prices of hand sanitizer sold at 30,000 U.S.-based stores across five retail formats. Major insights include the following: (1) The severity and spread of flu activity are good predictors of hand sanitizer purchases; (2) Stocking, pricing, and assortment strategies of hand sanitizer varied significantly among store formats. Consumer sanitizer purchases gravitated to two formats with distinct strategies – warehouse clubs that stocked large pack sizes at low per-unit prices and drug stores that carried wide assortments of sanitizer products; (3) Retailers appeared to learn from their pandemic experiences. During the first pandemic wave, assortments declined, indicating widespread stockouts. During the second wave, retailers were prepared with greater assortments of sanitizer products, including large pack-sizes favored by consumers; and (4) Retailers did not appear to engage in price gouging after the onset of the pandemic emergency, although prices were slightly (but significantly) lower in states with the laws compared to states without the laws. Finally, the paper draws parallels between the swine flu pandemic and the COVID-19 pandemic. Sanitizer sales patterns were similar during the two pandemics, although surges were more pronounced during COVID-19. This similarity in sales patterns provides an indication that lessons learned from previous pandemics may be applied to future pandemics.

Shopping Activity at Warehouse Club Stores and Its Competitive and Network Density Implications

Warehouse club (WC) retailers have typically expanded to new markets using stand‐alone stores, rather than pursuing dense store networks as other (non‐WC) retailers have in the past. While this strategy generates operating efficiencies, it also imposes high travel costs on households to shop, which calls into question WC stores' resilience to spatial competition from stores operating other formats. We examine this phenomenon by using data on households' shopping activity across markets served by Costco Wholesale stores. Specifically, we evaluate these stores' resilience to spatial competition by estimating the share of households' expenditures relative to travel costs to shop at the stores and comparing this estimate with that for non‐WC stores. Controlling for households' travel costs across Costco and non‐WC stores, we find that households' share of expenditures at Costco stores exceeds the share at non‐WC stores by 61%. This suggests that Costco stores have an advantage over non‐WC stores when serving market areas with sparse store networks. Nevertheless, we also find that this advantage diminishes with the distance between Costco stores and households and that there is a finite distance beyond which this advantage disappears. We show that this distance (approximately 21 miles) is an important reference point for the evaluation of spatial competition between Costco stores and other stores and the examination of demand saturation at Costco stores.

International retail format transfer: A comparison study of Australian and U.S. warehouse club members

Costco successfully transferred its Warehouse Membership Club (WMC) format to Australia. This research: 1) develops a conceptual framework to examine the role of consumer perception of format-specific core attributes in shaping the hedonic shopping experience and customer loyalty; and 2) compares Australian consumers' responses to the novel WMC format with U.S. consumers' responses to the familiar, mature format. We collected survey data from Australian and U.S. Costco members after Costco's entry into Australia's retail market and we tested the proposed model with a multiple-group structural equation modelling technique. Our findings suggest that value and hedonic shopping experience contribute to consumer loyalty in both countries. However, value is perceived as more important in shaping hedonic shopping experience, but less important in building loyalty in Australia than in U.S. When transferring a retail format that is novel to host country consumers, global retailers should factor in the novelty effect and emphasize the management of core format attributes that embrace the differences and carry particular importance in building customer loyalty.

If You Build Them… Will it Matter? Food Stores' Presence and Perceived Barriers to Purchasing Healthy Foods in the Northeastern U.S.

AbstractPolicies incentivizing store entry or store improvements are aimed at increasing access to healthy foods; however, findings about their effectiveness to improve diets are mixed. Similarly, little is known about whether food stores' presence affects consumers' perceived barriers to purchasing healthy foods, which reflect the subjective hardships experienced by shoppers to purchase and consume healthier foods. In this study, we assess the relationship between the two most widely studied perceived barriers to purchasing healthy foods (price and availability) and the local retail food environment using individual‐level survey data collected across the northeastern US and census data on the numbers of grocery stores and warehouse clubs and supercenters. Our results indicate that unobserved heterogeneity plays an important role in determining the sign and magnitude of the relationship between store presence and perceptions. The likelihood that an individual cites price or availability as a perceived barrier depends upon the barrier considered, whether respondents live in the zip code where they shop, and the method of controlling for unobserved heterogeneity. Thus, policies focusing on improving access to a given store type may only mitigate some of the negative perceptions associated with one's food environment.

The Ethicality of Point-of-Sale Marketing Campaigns: Normative Ethics Applied to Cause-Related Checkout Charities

“Would you like to contribute to XYZ charity by adding a dollar to your bill today?” Point-of-sale campaigns for fundraising are common to grocery stores, pharmacies, restaurants and warehouse clubs. Commonly referred to as ‘checkout charity,’ these fundraisers have generated over $4.1 billion in contributions for nonprofits over the past three decades. Yet little research has focused on the ethicality of this type of campaign. To address this need, we analyze the issue using behavioral ethics (moral identity and emotional triggers of behavior) and normative theory (consequentialism, deontology, and virtue ethics). We consider three stakeholder perspectives, including the nonprofit initiating the campaign, the business hosting the campaign, and the donor. Often ethical theories are seen as competing for primacy rather than being complementary perspectives in choosing the best action. We demonstrate that ethical discernment results in a richer analysis when consulting multiple frameworks. The purpose of this paper is to provide a set of ethical considerations for individuals to draw upon when devising and donating to checkout charity campaigns. This analysis will serve as a conceptual resource for scholars, practitioners, and students of nonprofit and for-profit management.

Americans' Food Spending Patterns Explain Devastating Impact of COVID-19 Lockdowns on Agriculture

First paragraph: The U.S. Department of Agriculture Economic Research Service’s Food Expenditures by Outlet data provide insight as to why the lockdowns related to COVID-19 have been so devastating for U.S. farmers. In 2018, American consumers bought a total of $628bn[1] worth of food, of which $460bn was spent at grocery stores and $168bn at warehouse clubs and supercenters (see Figure 1 and Table 1). But expenditures on food away from home exceeded that amount: $680bn was spent at restau­rants, $337.8bn at full-service restaurants and $340.2bn at limited-service restaurants.[2] The social distancing and stay-at-home orders related to the COVID-19 pandemic have forced many restaurants to close and those remaining in business to switch to pick-up or delivery only options. Because restaurant supply chains are highly specialized and time sensitive, reallocation of these supply chains has not come quickly enough to accommodate the shifts in consumption toward at-home eating patterns. . . . [1] All amounts are in U.S. dollars. [2] Not all of this represents the value of agricultural products; a large share of this is value-added in the form of rents and wages.

Wholesale and retail trade sector occupational fatal and nonfatal injuries and illnesses from 2006 to 2016: Implications for intervention

We analyzed the Bureau of Labor Statistics (BLS) fatal and nonfatal injuries and illness data on U.S. workers in the wholesale and retail trade (WRT) sector from 2006 to 2016. The purpose was to identify elevated fatal and nonfatal injury and illnessrates in WRT subsectors. To assess the WRT health and economic burden, we retrieved multiple BLS data sets for fatal and nonfatal injury and illness data, affecting more than 20 million employees. We examined yearly changes in incidence rates for lost work-time across event and exposure categories. In 2016, 553 100 injuries and illnesses and 461 fatalities occurred among WRT workers. WRT has a disproportionately 5% larger burden of nonfatal injuries for its size. From 2006 through 2016, wholesale sector fatality rates (4.9/100 000 FTE) exceeded private industry rates (3.8/100 000 FTE). The largest causal fatal factors were transportation in wholesale and violence in retail. Private industry and WRT experienced a decline in nonfatal injuries and illnesses. Wholesale subsectors with elevated nonfatal rates included durable and nondurable goods, recycling, motor parts, lumber, metal and mineral, grocery, and alcohol merchants. Retail subsectors with elevated rates included motor parts dealers, gasoline stations, nonstores, tire dealers, home and garden centers, supermarkets, meat markets, warehouse clubs, pet stores, and fuel dealers. Through the identification of safety and health risks, researchers and safety practitioners will be able to develop interventions and focus future efforts in advancing the safety and health of WRT employees.

Less is More Expensive: Bulk Buying and Inequality

Quantity discounts are an effective way for households to save money. I explore how large these quantity discounts are, how bulk buying differs by income, and how other factors affect the bulk buying decision. Using Nielsen’s granular store- and household-level data, I establish two empirical facts. First, quantity discounts are large for a wide range of products. Second, low-income households are less likely to buy in bulk than high-income households. I estimate that low-income households could reduce their grocery expenditures by 5%, saving an aggregate of $5.4 billion annually, if they bought in bulk to the same extent as high-income households. I augment Nielsen data with new data that I collected on state-level unit-price regulations and on warehouse club entry. I find that a combination of cognitive costs, store preferences, budget constraints,and storage costs discourage low-income households from realizing these savings. I then estimate a discrete choice model of household purchasing behavior to quantify how bulk buying changes when cognitive costs and storage costs are reduced. Counterfactual simulations show that mandating the display of unit prices, which has only been adopted by nine states, would reduce the difference in how often the highest- and lowest-income households buy in bulk by 26%.

The effect of competition on pricing and product positioning: Evidence from wholesale club entry

This paper empirically examines incumbents’ reactions to market entry along price and non-price dimensions in the example of wholesale warehouse entry into grocery retail markets. Leveraging a detailed retail panel spanning 2001–2011 and a novel dataset documenting opening and closing dates and locations of all Costco warehouse clubs, we classify incumbent retailers’ strategic responses (e.g., pricing, assortment) by the storability of product categories, controlling for persistent systematic differences across retailer–product combinations. We find that retailers are substantially affected by increased competition from wholesale club warehouse openings and in response increase the variability of their prices, consistent with adoption of the Hi–Lo pricing strategy. In addition, incumbent retailers’ strategic responses differ significantly across storability levels: They are more likely to increase prices and reduce assortments for highly storable products and decrease prices and increase assortments for less storable products. We extend our analysis by exploiting the spatial variations in our data and analyzing divergent market effects across geographical areas. We find significant geospatial differences in these strategic responses.

Consumption trends and the warehouse club retail format

PurposeSince emerging in 1983, warehouse club growth outpaced traditional grocery stores. Individual consumption in the U.S. grew concurrently. We investigate whether there is a connection between the emergence of the warehouse clubs and Americans' unparalleled consumption levels.FindingsUsing standard principles from microeconomics, we postulate that consumers' increasing acquisitiveness is sufficient to explain (a) why warehouse clubs have grown at a faster rate than the traditional retailers and (b) how the emergence of the warehouse club may have accelerated the growth in personal consumption.ConclusionWarehouse clubs may have contributed to the rapid growth of Americans' consumption rates.

Consumption Trends and the Warehouse Club Retail Format

Is there is a connection between the emergence of the warehouse clubs and Americans’ unparalleled consumption levels? Since emerging in 1983, warehouse club growth has outpaced that of traditional grocery stores. Individual consumption in the US has grown concurrently. Using standard principles from microeconomics, we postulate that consumers’ increasing acquisitiveness is sufficient to explain (i) why warehouse clubs have grown at a faster rate than the traditional retailers; and (ii) how the emergence of the warehouse club may have accelerated the growth in personal consumption.

Fundamental Basket Size Patterns and Their Relation to Retailer Performance

This paper uses a sample of approximately 60,000 US households to document fundamental basket size patterns across a range of retailer types (e.g. grocery stores, convenience stores, and warehouse clubs), and studies them in relation to retailer performance metrics (unit sales and dollar revenue). This research examines 1) how patterns in basket size (distribution, means, and medians) differ by retailer type, and 2) how the Pareto principle extends to shopping baskets across different retail types. The results show that basket size patterns in retailers are predictable. Shoppers purchase more items on average in retailers that offer a greater variety of items, and the distribution of basket sizes follows the Poisson lognormal model. The results also show that the largest 20% of shopping baskets on average generate 50% of unit sales, and 40% of dollar revenue. These patterns provide marketing academics with more knowledge about how people behave when they go shopping, and set additional benchmarks of what patterns can be expected on a basket-level. This research also offers support to marketing practitioners by showing the importance of different shopping basket characteristics (e.g. frequency of light buyers), which can guide more informed decision making to better manage their brands

Competition Among Retail Formats

In this paper, I study how households allocate their budget for food and related items across different types of retailers. I construct a structural demand model that coherently characterizes both consumer expenditure and expenditure allocation among six retail formats. The model considers how price and assortments influence expen- diture allocations. To illustrate how my demand model can be applied in practice, I consider a situation faced by discount stores, during the Great Recession. In 2008, discount stores experienced a loss in share to other retail formats like warehouse clubs. I use my model to examine two different policies that discount stores could use to compete with other retail formats. First, I consider whether discount stores should compete by lowering prices. Second, I evaluate the effectiveness of introducing a new retail format that has smaller assortments. I find that introducing a small-size format is relatively more effective than competing with lower prices.

A Literature Review of Retailing Sector and Business Retailing Types

retail sector probably is the most important sector of economy because it has to do directly with consumer. It includes all stores, from kiosks and small groceries to supermarket chains and shopping malls that sell products and services to final consumer for personal and household use. The aim of this paper is to make an investigation of retail sector and its business type. To gather the data, second resources has been used. A deeply scanning of literature has been performed. According to the investigation, the retailing sector generally is organized in two main groups: the retailing within the store and retailing out of the store.Retailing within the store is classified according to different characteristics, but the most important types of classification are those based on the form of the ownership, merchandise and price. According to the ownership-based classification, the most important types are independent stores, chain stores, franchising and leased department stores. According to the merchandise-based classification the most important types of retailing are department stores, supermarkets, specialty stores, convenient stores, superstores and retailer services. According to the price-based classification, the most important types of retailing are discount stores, factory outlets, category killers, off-price stores, warehouse clubs and hypermarkets. According to the place-based classification the most important type of retailing are shopping centers. The most important types of retailing out of the store are direct selling, direct marketing and automatic vending machines selling.