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Join the Club and You Can Get It Wholesale (or, Just About)

February 26, 1988|KAREN NEWELL YOUNG | Karen Newell Young is a regular contributor to Orange County Life.

They can get it for you wholesale. Or almost.

"They" are the dozens of warehouse shopping clubs that have opened in Southern California in the last three years. And all you have to do to buy merchandise at wholesale prices is join the club and be ready to wrestle 10-pound bags of sugar and 6-pound cans of fruit.

As part of a series on membership shopping, the Shopping column during the next two weeks explores warehouse clubs, their marketing strategies, their merchandise and their membership requirements. Today, the column examines cash-and-carry clubs that sell food and general merchandise. Next Friday, we will look at specialty clubs, such as the Home Club (home and building supplies) and the All American SportsClub (sporting equipment).

The warehouse club boom was born in San Diego when Price Co. opened the first Price Club in 1976. Since then, scores of warehouses have opened across the country, with many of them sprouting in Southern California, particularly since 1985.

Why are all these discount warehouses flocking to affluent Orange County and its environs?

"Because Southern California is an established and proven market," said Glenn Johnson, a retail analyst with Piper, Jaffray & Hopwood, a regional investment banking firm in Minneapolis. "The Price Club has been very, very successful, with volumes over $100 million in some of those stores. So it made it a real attractive area to move into."

And shoppers have found the prices attractive enough to pay $25 a year for the privilege of buying wholesale merchandise off industrial shelves in giant buildings that have all the charm of a parking garage. Shoppers scour the aisles of the cavernous warehouses, lifting 25-pound bags of sugar, lawn furniture, vacuum cleaners, books, cases of soda and laundry detergent into huge carts, and sometimes onto six-wheel dollies.

The warehouses--most of which are at least 100,000 square feet--sell groceries, hardware, auto supplies, a small amount of fresh produce, liquor and party supplies, large and small appliances, books, clothes, lawn and pool supplies and toiletries. To lug the stuff home, most of the warehouses offer free boxes.

The prices are low. For example, Post Raisin Bran is about $2.45 for a 25-ounce box at the warehouse clubs visited last week; Vons charges $2.59 for a 20-ounce box. Diet Coke is about $3.25 for a 12-pack of 12-ounce cans at the clubs; Vons charges $1.99 for a 6-pack. Most of the clubs charge about $12.50 for the Orange County-Los Angeles County Thomas Guides; they list for $21.95. Costco charges $49.99 for the Gerry Guardian children's car seat; the seat costs $79.97 at Toys 'R Us.

The key to the rock-bottom prices is high-volume sales. The clubs can sell at wholesale by quickly turning over mountains of merchandise. They also have low overhead and computerized inventory to help keep costs down.

But to get to the bargains you have to join the club. To qualify you must either own a business (or be the purchasing agent of a business) or be a member of a designated group, usually the following: current or retired government employees, members of local labor unions and credit unions, employees of hospitals, banks or savings and loans, public schools or public utilities. In addition, some clubs are now admitting licensed professionals, such as dentists and architects. Each club has specific membership requirements and membership counters to answer questions about policy. To find out if you qualify, call the warehouse to get the information.

Most clubs charge $25 a year to owners of businesses (or purchasing agents for businesses) for a primary card and $10 each for secondary cards (for spouses or friends). Some clubs offer a group card (for one primary card and one secondary card) for between $15 and $30. The cardholders described above pay wholesale prices. Some clubs offer non-business customers the option of membership or paying wholesale prices plus 5%.

Membership restrictions allow the warehouses to track their customers and their needs better than most stores. Suggestion boxes are placed prominently at most of the club doors, and merchandise is stocked based on members' needs. And the membership format cuts down on paper work, including the cost of hunting writers of bad checks. Filling out detailed membership applications, with home and business addresses and phone numbers, discourages shoppers from writing rubber checks to begin with and helps the warehouses find the culprits when they do.

All of these elements help the clubs cut costs.

"It's a business of tremendous volume," said Douglas Hansen, vice president of Price Savers, which is based in Cincinnati and owned by the Kroger Co. "The reason we have low prices is because we have rigid expense controls."

As the club field becomes increasingly crowded, analysts wonder how profitable the warehouses can continue to be.

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