November 27, 2017
Buy in Bulk: The Retailers That Keep Thriving
Following our previous discussion on traditional retail brands and off-price retailers, another strong category of enterprises which managed to survive the latest disruptions are wholesale companies. These shops focus on selling goods in bulk to large families (and individuals) and small businesses. The most prominent examples are Costco, Sam’s Club, and PriceSmart. With smart investment in PIM solutions, all three were able to increase their revenue at a time of general market downturn.
Costco, the second largest retailer in the world after Walmart, has maintained its competitiveness by relying on active memberships, each of them with their unique perks, and selling the best brands in bulk at low-cost. The results have been better than expected in the last fiscal year. The company opened 29 new locations and net sales went up from $114 billion to $116 billion (2%).
Costco owes this success to their limited catalog of 3,700 distinct products (as opposed to Walmart which carries approximately 140,000). The wholesaler prefers not to carry multiple brands or varieties if the product is essentially the same, which results in substantial discounts for high-volume sales from vendors. Costco has also been running a very lean business and has drastically limited any costs in the past four years to approximately 10% of net sales (for selling, general and administrative expenses).
Technology, the Root of Growth
These accomplishments are no doubt the result of regular technological investments. Costco has made an effort to improve their supply chain effectiveness (merchandizing, in-stock availability of in-demand products, additional distribution points for better delivery times) and upgrade their website for a first-rate user experience. The company has added better search capabilities, streamlined the checkout and returns process, included tracking for all orders and introduced a new co-branded Citi/Visa Anywhere Card for all the members who prefer to pay with a Visa card, both in US and Puerto Rico. Thus, their eCommerce business grew by 15% to nearly $4 billion in sales.
Sam’s Club is another membership-only warehouse club which revamped their digital component and leveraged technology and data to target, attract and retain members. Throughout the last year, Walmart introduced attractive new digital tools like Scan & Go (scan in the shop and pay with your smartphone) and mobile check-in and prepayments for the Club Pickup, which grew 31%. These investments proved to be the pivotal point in turning around the poor financial performance of this segment – in 2017, Sam’s Club net sales increased by 0.5% compared to the net decrease of 3.2% in 2016.
PriceSmart, who serves nearly 3 million members, also needed to make heavy investments in technology (up to 14.1%) and has started to see some of the first benefits in the after-tax profits which increased by 3.7%.
The Pitfalls of Data Mismanagement
The wholesale retailers see the failure to adopt a reliable technological system that can gather and process data, compile relevant results and help the decision-makers manage the business as a major risk to their operations.
They have recognized the necessity of maintaining membership loyalty and brand recognition and to invest in multichannel to meet the demands of a younger audience which shops using a variety of digital devices and prefers to interact with brands through social media. A healthy supply chain and the efficient distribution of goods is another piece of the puzzle that is data-intensive and ensures consistent product quality, availability and a competitive pricing compared to traditional retailers.
Any small damage to their brand or reputation would adversely affect the operations of these retailers and could cost them their business, as their success depends heavily on the continuous growth of their membership base and maintaining a high renewal rate.
Companies like Costco will continue to make significant technological investments to improve and replace outdated information systems which are critical to processing large volumes of sensitive data and preserving the privacy and the security of all business information. A Product Information Management (PIM) solution hits all the marks of a modern data management system and integrates all the tools for a flawless administration of product data across the enterprise.
What Can PIM Do For Wholesale Retailers?
- Develops your in-store and eCommerce channels through rich product data to help you acquire a larger share of the digital market;
- Offers advanced analytics for shaping revenue-growth strategies and making faster and better decisions compared to your competitors;
- Provides insights to optimize your sales approach – improves the choice of product (product range, product lines), pricing (price-setting, strategy, and discounts), and the marketing communications on omnichannel;
- Helps you connect and collaborate with your customers, address their problems and improve the complementary services (before, during and after a sale);
 Costco Annual Report: http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-reportsannual
 Sam’s Club Annual Report: http://stock.walmart.com/investors/financial-information/annual-reports-and-proxies/default.aspx
 Price Smart Annual Report: https://shop.pricesmart.com/tt/en/investor/annual-reports