Should Wholesale Clubs go Digital?

The Lempert Report
March 18, 2014

Online delivery services pose a threat to Supermarkets, but as retailers keep wary eyes on places like Amazon Fresh, they may be missing the real threat.

We believe  wholesale clubs could be a major player in the online grocery delivery world.  It would be a win win for these clubs who could grow food volume and membership fees by attracting a broader base of new members, and making their ‘out of the way’ locations convenient.  

Clubs already enjoy have good reputations for much of the food they sell, including fresh and now if they could structure an online delivery business that  encourages multiple purchases, while still inspiring people to go to the clubs, we feel they’ll grow volume rather than cannibalize it.

Costco is online but currently not focusing on regular purchases. For example, the lowest price cheese is an $84.99 collection, and the highest price is a 72-pound wheel of 24 months aged Parmigiano Reggiano for $899.99. Another example,  the lowest price beef is 10 pounds of organic grass-fed 85/15 ground beef for $99.99, and its highest price is Japanese Wagyu Kobe Beef A-5 Grade for $1,499.99 ($136.37 per pound).

These items are great for special occasions and to appeal to customers with specific needs, but they're certainly not items for a regular weekly shopping trip.  For online, clubs would need to focus on more mainstream needs. 

Also, clubs can be inconvenient in terms of getting to their location, big parking lots and long lines, so by going online customers are given options. 

With online grocery delivery they could be, clubs could offer convenience – and that could help them raise their following among consumers.