Costco Wholesale Versus Sam's Club Versus Bj's Warehouse

MGMT 5650

Case 4 Assignment Questions

1. What is competition like in the North American wholesale club industry? Which of the five competitive forces is strongest and why? Use the information in Figures 3.4, 3.5, 3.6, 3.7, and 3.8 (and the related chapter discussions on pp. 57-70) to do a complete five-force analysis of competition in the North American wholesale club industry.

The competition in the North American wholesale club industry draws the most of its competition from three top wholesalers; Costco Wholesale, Sam’s Club, and BJ’s Wholesale Club. These companies use aggressive marketing campaigns, against rival sellers, in order to attract and retain buyers in the strongest area of the five competitive forces.

Of the three top wholesalers the competition is relatively one-side as Costco had 65% more total revenue in 2009 than its next biggest competitor Sam’s Club. It would be hard press for new entrants to come into this mark as these three wholesalers have over 37% share, based on population, of the market and have been established for almost 30 years. Just the marketing and distribution, and branding would be tough to compete against with these industry giants. Since these were wholesalers they did not have much competition from product substitution as they were able to sell goods of higher quality for prices much less expensive than supermarkets and other department stores. They did this by buying product for other wholesalers who wanted to get rid of excess product. When it comes to bargaining power Costco was the leader as it was able to offer lower prices, in the 14%-15% markup range versus 20% for its competitors. They were able to add this value by removing all the gimmicks and cost associated with conventional wholesalers and retailers.

2. Do all three warehouse club rivals—Costco, Sam’s, and BJ’s Wholesale—have highly similar strategies? What differences in their strategies are apparent? Does one rival have a better strategy...