LESS IS MORE AGAIN

RICHARD TURCSIK

Sometimes bigger isn't always better.

The development of warehouse clubs, which sprang up faster than mushrooms after a summer rain, was heralded by some as the death knell for the conventional supermarket.

But today the threat appears somewhat hollow. The warehouse club industry has consolidated into three key players: Sam's Club (a division of Wal-Mart Stores), Price/Costco and BJ's Wholesale Club -- and with a few notable exceptions, the large-size cans, bottles and caseloads have fallen out of favor with shoppers.

Donald J. Stuart, a partner in Cannondale Associates, a consulting firm based in Wilton, Conn., and Evanston, Ill., said club packs were originally developed for institutional use, but quickly became supermarket "me too" items when warehouse clubs began to court consumers and siphon off supermarket sales.

Stuart said that while club packs initially were well received by both consumers and retailers, long-term results proved to be "muddled," with some retailers electing to create club aisles and others deciding to merchandise the larger packs next to their traditional-size counterparts.

"I think most club aisles have been less than successful for grocery retailers. That is sort of a disconnect for consumers because they are not always looking for large items in a separate place. They would rather see a category fully integrated. But having to modify shelves to accommodate those larger size packs can also be a restraining factor," Stuart said.

"The clamor that 'if the clubs have it, I want to have it, too' has started to die down," said Ken Harris, a partner in the Evanston, Ill., office of Cannondale Associates. "Grocery retailers have bigger issues that they are focused on. They feel that the threat of club stores has diminished and now they are focused on supercenters. The din that was being created around those packs has sort of subsided."

Retailers stocking club packs report mixed results in their success.

Shari Steinbach, consumer affairs supervisor at Spartan Stores, a wholesaler based in Grand Rapids, Mich., said Spartan initially experimented with a large selection of club packs, but many proved unpopular and have since been discontinued.

"Some of the club items were slow-moving and taking up large amounts of space on the shelves, which decreased space for other items. Most of the consumers who come to our stores tend not to want huge cans and products like that. They just didn't have places to store them. But the paper products do go well," she said.

Steinbach said instead of promoting club packs, the wholesaler is now promoting multipack pricing, which has been a hit with shoppers and doesn't penalize those who buy smaller quantities.

Likewise, Springfield, Mass.-based Big Y Foods, which at one time devoted 1,000 square feet in an alcove in its larger stores to club packs, has all but eliminated them, said Phill Schneider, director of sales and procurement.

"Sales initially were very good. However, during the last two years, sales have eroded to the point where we have all but eliminated the club packs," he told SN. "We attribute the sales erosion to our weekly Express Savings Club Card sales program, primarily because that program promotes stocking up on standard sizes, and we really haven't been promoting the club packs.

"We have discovered through category management that there are certain club packs that are needed, including bar soaps, paper goods and detergents. We merchandise those items on the shelf integrated with the other items in those categories," he added.

Mark Polsky, senior vice president of Magruder Inc., Rockville, Md., said since many of his stores are on the small side, he merchandises club packs on an "in and out" basis.

"Somebody brought me a club pack of fabric softener sheets about six months ago and we determined that it was a two-and-a-half-year supply in one box. Who needs that?" Polsky asked.

Jim Dorcy, vice president of advertising and marketing at Bozzuto's, a Cheshire, Conn.-based wholesaler that primarily services independents, said the development of club packs caused a host of problems for his customers, many of which operate stores of less than 25,000 square feet.

"For our customers, the question is not whether to carry club packs in addition to all the regular varieties, but in some cases to carry them instead of some of the regular sizes," he said.

"Many of our retailers who do choose to carry club packs tend to merchandise them in areas of the store that are separate from the regular varieties. Often they stock club packs of all categories together in one aisle to appeal to consumers such as small business operators who tend to buy large volumes of several items such as paper towels, napkins and other paper products," Dorcy said.

Other retailers find it is best to merchandise the club packs integrated in with the other groceries.

"We merchandise our club packs within our everyday sections," said Michael Shultz, senior vice president of Hughes Family Markets, Irwindale, Calif. "We stock larger than normal size a lot of times, rather than banded club items. This allows for not having to match club prices," he said, noting that sometimes the club packs do impact the sales of their regular-size counterparts.

Gary Price, vice president of merchandising at Minyard Food Stores, Coppell, Texas, said club packs sell well in his company's Sack 'n Save warehouse stores and larger Minyard units.

"We carry a pretty good variety of club packs. We do it for competitive reasons because Albertson's has them and Sam's Club" is here, too, he said.