Picture this: It’s 7 a.m. You swing your truck into an almost empty parking lot grabbing a spot near the entry. You flash a card at an attendant as you enter a cavernous space where goods from soup to nuts to air conditioners are stacked almost floor to ceiling. You grab an oversized cart and pile it high with cases of toilet tissue, soft drinks to stock the office fridge, a year’s worth of copier paper, a huge package of muffins to treat everyone back at the office to breakfast … for a couple of days, plus a two-pack of toner cartridges for your printer and a 50-piece tool set that just happened to catch your eye. You check out without having to wait in line and you’re heading to the office by 7:25.
In this scenario, you utilized a business membership at a warehouse club. Did you save money on every single item? Maybe. Maybe not. Did you save time using one-stop shopping and special business member hours? Probably. Is belonging to Sam’s Club, Costco or BJ’s worth the price of membership for a small business? That depends on several factors.
WHY PAY TO SHOP?
The warehouse club concept is simple. Consumers or businesses pay an annual membership fee. Nonmembers either can’t shop at the club or pay a 5 to 15 percent markup on everything they buy. The club is a no-frills retail experience where products are not arranged in lovely displays, but sold directly off pallets. Items are sold in bulk.
You’ll find everything from big-screen TVs to specialty beer at these stores. But will you find enough staples of your small business to make a membership worthwhile?
An obvious example for PROs is found in the ample bulk-packaged paper products aisle. You use a lot of toilet tissue and hand towels. Could the warehouse club be your go-to supplier of these products, or at least save you money if you’re running short of product during a major special event?
Or look at the maintenance needs of your vehicle fleet and restroom inventory. Do you replace a dozen tires a year on your pickups and service vans? How about batteries for your trucks, radios or hand-held devices? Do you go through power washers or other tools with regularity and can pick up replacements at the club?
SELLING SERVICES, TOO
Warehouse clubs offer a variety of services to businesses, which may or may not be cheaper than purchasing those services elsewhere.
While they vary, one warehouse club offers 401(k) retirement plans, business phone packages, payment processing and payroll services, water delivery and check printing. Another warehouse club offers deep discounts on prescription medications in its pharmacy for business members as well as online ordering for next-day pickup, early shopping hours and credit card processing services.
One club offers inexpensive health screenings, another offers home and auto insurance in selected states. One has even gotten into the small business lending game. Some clubs have adjacent member-only gas stations, which may or may not sell gas cheaper than other local stations depending on location and circumstances.
WHICH CLUB IS FOR YOU?
Membership costs $40 to $110 annually, depending on the club and type of membership. They all offer at least one level of membership plan that rewards customers with 2 percent payback on purchases up to a certain point. For big-volume shoppers, this means the membership can pay for itself, and then some. For example, purchasing six 80-roll cases of Georgia-Pacific Envision 2-ply bath tissue for $45.89 each every two weeks for a year would pay for a $110 Costco Executive Business membership, plus $22. (Yes, that’s 11,520 rolls, but you get the point.)
If you are in an area with a choice of warehouse clubs, check them all out. Traditionally, Sam’s Club has targeted small businesses, offering special shopping hours for business members and other perks. However, if the nearest Sam’s Club is further away or doesn’t offer the products, brands or services your business is most likely to purchase, it’s not the best choice for you. Conversely, Costco may have what you need at great prices, but if you are going to waste 30 minutes circling the parking lot and standing in the checkout line every time you go there, maybe Sam’s is the best choice even if it’s further away.
In addition to the merchandise you see on the store floor, research the services each club offers. One may offer car rentals while the other offers boat loans. Will you use either of these? One of the chains does not have pharmacies. Is that a deal breaker for you?
MEMBERSHIP AS AN EMPLOYEE BENEFIT
Purchasing warehouse club memberships for your employees can be an appreciated yet somewhat inexpensive perk. Some companies give them as rewards for outstanding service or as Christmas gifts to employees. Some levels of membership allow 6 to 8 “add-on” memberships, which may be enough to supply a small company’s entire office staff with a card. They can do their personal shopping at the club and it’s convenient that anyone on the staff can run out for office supplies.
In addition to providing employees the chance to save a little money on groceries and household supplies, they may take advantage of discounted services offered by the warehouse club that you can’t afford to provide as benefits. For example, many health insurance plans don’t pay for routine vision exams. An eye exam at a clinic can run $200 out of pocket. An eye exam at a warehouse club is between $60 and $100. So while not fully covered, members see significant savings. Similarly, I found a club membership paid for itself at a time when my heath insurance did not provide a prescription benefit. Medications were significantly less expensive at Sam’s Club for those with a certain level of business membership.
SAMPLE THE CLUBS FOR YOURSELF
The only way to decide if a warehouse club membership is worth the expense for your business is to take the time to compare prices of the goods and services each club offers that your business will utilize to what you are paying for those things now. And don’t forget to factor in your time and how much you value convenience.
One final piece of advice: do your in-store research on a Saturday. That’s when clubs are most crowded, so you’ll get a feel for the parking lot situation and wait times at the registers. And that’s when they give away the most food samples. So even if you decide not to join, you’ll get a free lunch out of it so it won’t be a complete waste of time.
