You’d be hard pressed to find anyone in the U.S. that hasn’t visited a warehouse club at least once in their life. The retail giants are known for carrying a variety of general household products at discount prices, in exchange for a membership fee.
But where did these warehouse clubs come from? What is their impact on the retail industry?
My name is Sahm Adrangi, and I am the CIO of Kerrisdale Capital. Kerrisdale Capital aims to investigate and educate others on common misconceptions about fundamental business prospects. I, Sahm Adrangi, have researched and published reports in the retail space.
In this article, I, Sahm Adrangi, will give you a brief snapshot of the warehouse club industry.
Kerrisdale Capital – What is a warehouse club?
A warehouse club is a store that offers bulk merchandise in exchange for annual memberships fees with the incentive of deeply discounted prices. They operate out of enormous, low-cost facilities and sell items in bulk at an enticingly low cost.
The idea of a retail warehouse club was born in 1976. Since its introduction, a variety of companies have contributed to the expansion of the warehouse forefront either on a national or international level. However, one theme remains the same – a dominant no-frills and relatively resistant retail model.
Kerrisdale Capital – Trends in the U.S.
Trends in the warehouse club industry appear to be positive. With an annualized increase of 1.4% the warehouse retail-model has added $506 billion to the U.S. economy in 2019. In the United States alone, there are over 5800 warehouse clubs, while reports reveal that warehouse-retail has created over 1.6 million jobs.
Sahm Adrangi on Embracing E-Commerce
Of course, no industry is without its struggles. Since the emergence of online shopping, the warehouse club industry has taken a hit. Facing intense competition, some have placed a greater emphasis on e-commerce. A popular tactic is incorporating same-day or two-day grocery delivery.
Other methods include giving their consumers the option to buy online and pick up at the store. Some companies have even explored opening e-commerce fulfillment centers. Finding the optimum balance between in-store purchases and e-commerce could prove instrumental in the long-term growth of this industry.
Sahm Adrangi on the Recession
Some people believe that retail-warehouses are “recession-proof”. While that remains to be seen, it is true that clubs make little to nothing off of their merchandise. In fact, the primary source of income for warehouse chains comes from the selling memberships. If and when a recession does hit, it will be interesting to see how this business model responds.
About the Author: Meet Sahm Adrangi
Sahm Adrangi is known for his work exposing fraudulent Chinese companies. Several of which became subject to enforcement actions from the Securities and Exchange Commission. Adrangi has appeared in interviews with Bloomberg and CNBC. He has also been published in major sources including the Wall Street Journal. Today the CIO and founder of Kerrisdale Capital shares his research on the company’s website and Twitter account.
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