It’s a good time to be a wholesale club. BJ’s recently reported its quarterly revenue climbed nearly 10% from a year ago. Sales at Walmart-owned Sam’s Club beat Wall Street expectations, helped by strong gasoline sales.
The biggest of them all, Costco, with more than 80 million paid memberships worldwide and growing, is expected to report strong quarterly earnings on Thursday, thanks in part to higher-income customers who are still driving much of the consumer spending these days.
Michael Baker is a retail analyst with D.A. Davidson — and a member of both Costco and BJ’s.
“I do try to spread it out a little bit and go to both, both for personal and professional reasons,” he said.
Though if he finds himself heading out to shop while hungry? “Huge fan of the dollar-fifty hot dog at Costco, so that’s a draw for lunch every so often,” he said.
Baker said wholesale clubs, especially Costco, have long appealed to higher income consumers. Because to get those bulk deals, you need to be able to spend in bulk.
“You do end up walking out of the clubs having spent a lot of your budget,” he said.
Recently, more and more higher income customers are opting to do that, said Bryan Eshelman, managing director at AlixPartners.
“It’s been an ongoing trend, but I think it has been kind of heightened of late because of everything that’s going on in the economy writ large.
Put another way, said Neil Saunders of GlobalData: “Inflation has been a recruiting sergeant for the wholesale clubs. Costco has seen its market share grow enormously over the past five years or so, partly because they are attracting more affluent consumers into their mix.”
To compete with the growing wholesalers, Saunders said retail brands like Walmart are also trying to appeal to those higher-income shoppers.
“They are making the experience a bit more bougie. They’ve got some higher-end brands, more interesting products,” he said.
Because at the end of the day, Saunders said, “it doesn’t matter whether you have a lot of money or a little money, most Americans love a bargain.”
And that is what the wholesale clubs offer, he said, at least for shoppers who can afford an 80-pound wheel of Parmesan. (That’s a real Costco product, by the way.)
Related Topics