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The Alternate-Format Channel of Distribution in Costco, Sam s Club, and Wal-Mart

Presented by Morrison Consulting Inc.. 2. History of Costco. Price Club pioneered membership warehouse concept in 1976.Costco, founded in 1983, merged with Price Club in 1993.As of 2009, Costco is the 3rd largest retailer in US and 9th in the world.Since 2007, Costco has been the largest retailer

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The Alternate-Format Channel of Distribution in Costco, Sam s Club, and Wal-Mart

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    1. The Alternate-Format Channel of Distribution in Costco, Sams Club, and Wal-Mart

    2. Presented by Morrison Consulting Inc. 2 History of Costco Price Club pioneered membership warehouse concept in 1976. Costco, founded in 1983, merged with Price Club in 1993. As of 2009, Costco is the 3rd largest retailer in US and 9th in the world. Since 2007, Costco has been the largest retailer of fine wine in the world.

    3. Presented by Morrison Consulting Inc. 3 History of Wal-Mart and Sams Club Wal-Mart was founded by Sam Walton in 1962. First Sams Club opened in 1983. First Wal-Mart Supercenter opened in 1988. Today, Wal-Mart Stores Inc. is the largest company in the world. Wal-Mart is also the largest grocery retailer in the U.S.

    4. Presented by Morrison Consulting Inc. 4 The Alternate-Format Channel of Distribution In the United States Comprise $356+ Billion Opportunity Costco Wholesale Corp. 54 Sams Club 47 Wal-Mart and Wal-Mart Supercenter 255

    5. Presented by Morrison Consulting Inc. 5 What is the Scope of the Warehouse Club Industry Opportunity? Industry sales between Costco Wholesale & Sams Club are: $100+ Billion Dollars and growing A $22 Million Sales Opportunity per SKU Exposure to 103 million paying members/consumers

    6. Presented by Morrison Consulting Inc. 6 The Size of the Club Industry in the United States and Internationally Costco: 413 Clubs 40 States 153 Clubs 7 Countries Sams Club: 605 Clubs 48 States 100+ Clubs 3 Countries Total: 1200+ Clubs & GROWING

    7. Presented by Morrison Consulting Inc. 7 The Size of Wal-Mart in the United States Wal-Mart Stores 810 Locations Wal-Mart Supercenters 2,737 Locations Wal-Mart Neighborhood Markets 151 Locations Total: 3,700+ Locations in 50 States & GROWING

    8. Presented by Morrison Consulting Inc. 8 Average Item Sales per Club SKU per year Costco: 413 Clubs=$12MM or $585 per week Sams: 605 Clubs=$10MM or $325 per week Total: 1018 Clubs = $22MM or $ 910 per week

    9. Presented by Morrison Consulting Inc. 9 The # of Members/Consumers you can expose to _______ Costco: 56+ Million Members 21.5 Million Individual Members 5.7 Million Business Members Sams Club: 47+ Million Members In Business for Small Business until 2006 Mostly Business Members Total: 100+ Million Members

    10. Presented by Morrison Consulting Inc. 10 Theres still room for more Clubs in the United States Analysts believe a typical club needs a market population between 180,000 - 220,000 to be successful. In the last 5 years, Costco added 233 clubs, but average annual sales still grew by over $15MM per club. Near future focuses on Business Centers and International locations.

    11. Presented by Morrison Consulting Inc. 11 Expected Annual Expansion Costco: 30 New Locations Sams Club: 30~35 New Locations Wal-Mart : 230~240 New Locations

    12. Presented by Morrison Consulting Inc. 12 What it means for you to be in the Club Industry: $ Billion Market Share Opportunity Through 1,000 Outlets Nationwide Exposure: 100 Million Consumers Focus on 26 Points of Distribution Utilizing 2 Major Companies

    13. Presented by Morrison Consulting Inc. 13 How does this industry benefit you? No slotting & simple distribution. Fast access to critical mass, with high volume opportunity. The opportunity to build your brand into a household name. An outstanding financial base quick turn; solid customer credit credentials, almost guarantees payments for your goods. The ability to gain accurate information on a timely basis, including your product performance.

    14. Presented by Morrison Consulting Inc. 14 Club Warehouse Strategies Limited SKUs: 20% of items that do 80% of the business. Large sizes & unique packages: cross over between business & household consumers. Lower prices = significant savings based upon volume and 14-16% margins. Fast inventory turnover: 21 days = extended terms. Easy to merchandise: Cross dock depots, display pallets and master cases that merchandise the item fully. Demos are how you drive this business! SUMMARY: Buyers want quality items that save members time and money!

    15. Presented by Morrison Consulting Inc. 15 How to Initiate Contact with Clubs Manufacturer contact buyers in Asia. Manufacturer contact buyers in US. Importer contact buyers in US. Broker/Sales Representatives in US.

    16. Presented by Morrison Consulting Inc. 16 Club Warehouse Purchase Procedure Contact buyer for interest and appointment. Presentation. Samples, packaging mock up, pricing, program. Product finalization. Vendor/Product setup. Issue Purchase Order. Audits.

    17. Presented by Morrison Consulting Inc. 17 Follow Up and Marketing Weekly sales follow up. Demos. Additional warehouses. Kirkland Signature brand. Passport / Coupon Books. Mark Downs. Road shows.

    18. Presented by Morrison Consulting Inc. 18 Risks Initial preparation costs. Committed quantity. Do not over-expand. Discontinue item. Guaranteed returns.

    19. Presented by Morrison Consulting Inc. 19 Source Information: Warehouse Club Focus Supercenter Focus Costco Wholesale Annual Report Wal-Mart Corporation Annual Report

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