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Duel of the Discounters : New Competitors Seek Share of Membership Cash-and-Carry Trade

April 28, 1987|CHRIS KRAUL | San Diego County Business Editor

"We have plans to open additional stores in Southern California in 1988, but we are not prepared to to identify them," McIntire said. Nor would he provide sales data on the stores.

Pace and Costco executives are unabashed admirers--and copiers--of the membership warehouse formula developed by Price Co.'s Sol Price, 70, who is chairman of the company he founded in 1976. (Price's son Robert, 44, is president.) Costco, in fact, was founded by a group that included three ex-Price Co. executives.

Price Co.'s membership approach is a refined version of the one Price instituted at FedMart, a membership retail chain he co-founded in 1953.

The formula is predicated on a concept of opening Price Club doors only to member shoppers, who pay for merchandise in cash or by check. Only business owners and members of selected employee groups are eligible for membership--and then only if they pay a fee.

Most of the eligible groups consist of government employees, such as teachers, postal workers and municipal workers who have been "screened for stability" and who pose low risks of passing bad checks or pilfering, Price said.

WAREHOUSE WARS Three major discount membership warehouse chains--Price Club, Costco and Pace--are competing in Southern California, in addition to other discount stores and more specialized membership stores. A fourth chain--Price Savers, a division of Kroger Co.--has one store in South Gate and plans to expand operations here.

Memberships at these stores are generally open to certain large employee groups and businesses.

PRICE CLUB

27 stores; 11 more planned for 1987. Founded in 1976 and owned by Price Co. of San Diego. More than 750,000 business members and 1 million individual members. Membership fee: $25 per year.

Southern California locations: San Diego, Santee, Chula Vista, Colton, Norwalk, Santa Ana, Azusa, Burbank, San Marcos, Fullerton, Inglewood, Pomona, Oxnard, Signal Hill. Planned for 1987: Alhambra and San Juan Capistrano.

1986 revenue: $2.6 billion

1986 earnings: $58.9 million

COSTCO

38 stores, 9 more planned for 1987. Founded in 1983 and owned by Costco Wholesale Corp. of Seattle. 300,000 business members and 1.3 million individual members. Business members pay $25 and individuals pay $30.

Southern California locations: Riverside, City of Industry, Canoga Park and Bakersfield. Planned for 1987: Garden Grove, Van Nuys and two others.

1986 revenue: $762 million

1986 earnings: $4.5 million.

PACE

27 stores, 7 or 8 planned for 1987. Founded in 1982 and owned by Pace Membership Warehouse Inc. of Aurora, Colo. Businesses pay yearly $25 fee. As of Oct. 21, 107,700 business members and 1.8 million individual members. Individuals pay no fee but are charged 5% above the wholesale prices paid for goods by business members.

Southern California locations: Woodland Hills and El Monte. Planned for 1987: Chino, San Bernardino, Fullerton, San Fernando and Cathedral City.

1986 revenue: $602 million

1986 net loss: $1.1 million

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