NEW YORK -- BJ's Wholesale Club, Natick, Mass., expects to begin rolling out new stores that blend the best elements of its two Florida prototypes in 2007.
As previously disclosed, the company opened one concept club in Kissimmee, Fla., last year to test general merchandise initiatives, and it will open another concept club in Cape Coral, Fla., later this year focusing on food experimentation. Both represent the company's shift from a member-centric to a product-centric business model, Michael T. Wedge, president and chief executive officer, said at an investor conference here last week.
"In 2007, as we begin to move into new markets, our prototype club will be based on a blend of the two Florida concept clubs," he said.
BJ's operates 156 clubs along the East Coast and two ProFoods outlets designed to serve small food-service operators in New York City. Wedge said it's too early to comment on the status of the two ProFoods locations, one of which opened in October and the second in late January. "We're still in the incubation phase and watching how the business matures," he explained.
He said the format was an outgrowth of BJ's increasing ability over the last 18 months to segment its customer base and leverage that knowledge to drive sales through improved merchandise selection, adjacencies, pricing and marketing.
The program BJ's uses to segment customers is called Member Insight, "which stores information, beginning at the granular level with 8 billion rows of data that we can roll up in different combinations to study demographic information by member segments," Wedge explained.
One segment, for example, encompasses customers whose average age is 52, mostly female and predominantly Caucasian, with incomes higher than the average BJ's customer and with children, who have been BJ's members an average of seven years, who visit the clubs every two weeks and spend approximately $3,000 per year, who live 6.5 miles from the nearest club, put an average of 6.6 items in their baskets per trip and use $11 in coupons per year.
Once it has a picture of each segment, "we can determine our goals for increasing that segment's share-of-wallet by matching merchandise adjacencies and assortments with their shopping patterns and habits; increasing profitability by prompting more purchases of private brands and fresh products; and increasing loyalty through award programs," Wedge said.
"The beauty of Member Insight is the ability to uncover differences in buying habits right down to the item level and then working to fine-tune our programs to increase purchases."
Wedge said BJ's intends to increase private-brand penetration this year with more items and more marketing efforts. Since increasing the number of private brands from 520 in 2003 to 820 last year, private-brand penetration grew to 9%, compared with 6% in 2003, "and we see long-term opportunities to increase private-brand penetration to 15% to 20% at the same time we're increasing national-brand sales through better pricing," Wedge said.
