"It's approaching the saturation point," said Johnson at Piper, Jaffray & Hopwood. "Southern California is the only market where a number of (warehouse clubs) have come head-to-head. It's possible that still more stores could open in your area, but not nearly in the rate they have opened in the last year or so."
But warehouse executives say the market is still booming.
"We compete very well with the others," said Hansen of Price Savers. "Every one of our units is doing very well." His company reported $300 million in sales for 1987.
Price Savers is the new kid on the Orange County warehouse block. Opened last fall, the 110,700-square-foot building in Irvine is one of five Price Savers warehouses in California and 12 nationwide.
Costco, owned by Costco Wholesale Co. of Seattle, is also a relative newcomer to California. In the past two years, however, the 43-warehouse company opened seven clubs in the state, including one in Garden Grove. And according to President Jim Sinegal, Costco will continue to grow in Southern California: slated to open in 1988 are warehouses in Hawthorne, Van Nuys, Lancaster and Victorville. Sinegal said the company expects to report $2 billion in sales for 1987.
"We don't think saturation has been achieved," Sinegal said. "Southern California is as good or better for us than any other market. We find it is a good market because there are so many people."
Considered the behemoth of membership warehouses, Price Club leads the pack in terms of sales volume. Price Co. reported $3.2 billion in sales for 1987, a year in which the company opened 11 new stores. It is that kind of success that gave birth to the proliferation of copy-cat clubs and has all the competitors scrambling. Next to Price Club, analysts say, Pace and Costco are the largest in terms of sales volume.
"Price Clubs are our model," said Costco's Sinegal, who used to work for Price Co. "I'm very familiar with the formula; we patterned ourselves after Price Clubs, which were so successful in Southern California, and then we started ours in the Northwest."
He said Costco expects to report $2 billion in revenues for 1988.
Pace Membership Warehouse Inc. of Aurora, Colo., which owns the Pace warehouse in Fullerton and six others in the state, is another club on the expansion track. With warehouses set to open in Fountain Valley and Downey this spring, Pace is firmly in the fray.
"We continue to look for additional sites," said Henry Haimsohn, company chairman. He said his company estimates 1987 sales revenue at between $900 million and $1 billion.
"We viewed the entire (Southern California) area as very competitive, even before we went into it," Haimsohn added. "Certainly we are affected by not only our direct competitors in the market, but also the myriad of other retail and wholesale companies. It's a very competitive, changing market. In order to be successful, you have to adapt. It's important that we offer a good reason for people to shop at Pace."
The obvious reason people shop at Pace and the other clubs is low prices. But are warehouse clubs right for you?
If you feel comfortable propelling a giant shopping cart around aisles of jumbo packs, and if you have room to store large quantities, warehouse clubs may be your kind of supermarket. Customers also must trek across vast parking lots and pay by check or cash only. The warehouses are hangar-size buildings with concrete floors, industrial shelving and no frills. And if you are the type who likes to ask questions, you may be frustrated. There are few salespeople, although usually personnel posted at the front of the store can answer questions.
On the other hand, the savings are substantial. And buying in bulk means fewer trips to the market. Also, not all the merchandise is mammoth-size. Because the clubs seek individual members as well as business cardholders, the warehouses stock many family-size quantities as well as restaurant-size goods. For instance, near a 6-pound can of peaches, a club may stock a 19-ounce can of Campbell's Chunky soup or a 15-ounce can of green beans.
The best way to decide if you want to join a warehouse club is to stop in and check out the merchandise. Most clubs will allow non-members to browse without buying, or they will offer a free pass to buy at 5% above the posted wholesale price. The warehouses have membership counters where application forms are distributed, passes are given or questions answered.
With their noisy aisles and bare-bones marketing approach, warehouse clubs are not for everybody. But judging from the throngs wheeling cartloads of merchandise to their cars, shopping clubs are here to stay.
Next Friday: Warehouse clubs that specialize.