Case 4 Warehouse Clubs

Case 4: Competition among the North American Warehouse Clubs: Costco Wholesale vs. Sam’s Clubs vs. BJ’s Wholesale 1. Competition in the North American wholesale club industry is mildly intense. The players in the wholesale club industry try to achieve lower prices by reducing throughout the store by using pallets or inexpensive shelving to display items. They also incur very low costs for store decoration and light fixtures and a relatively low labor cost because of the use of fewer works and employees to operate the facility. The importance of the five competitive forces among the industry is high. Consequently, rivalry among competing sellers, buyers, and suppliers are the most important. The case discusses major wholesale clubs, so new entrants do not pose a large enough threat to affect these major clubs. Industries offering substitute products are not a significantly important factor because they do not offer the large quantities this case is discussing. Supermarkets offer the same products but the target market is completely different. These wholesale industries reach out to small businesses, large businesses, large families, caterers, small restaurants, churches, and bargain hunters. However, the pressure of buys is very vital. Customers, especially in this economy, always hunt for cheaper prices, and the demand in the industry is relatively high. Rivalry among competing wholesalers plays a major role. The capability to provide lower prices depends on the company’s relationship with the suppliers. 2. All three warehouse club rivals (Costco, Sam’s, BJ’s Wholesale) do have highly similar strategies, in that which they achieve lower prices for a bundle of goods. However, BJ’s is the only one who has not introduced itself internationally. Costco has managed to rise above the other competitors slightly, and has acquired a better market share. They have established a relationship with their suppliers, in order to provide better prices to the customers.