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It might seem pretty exclusive – you need a card to get in, but Costco, Sam’s Club, and BJ’s are all mass merchandisers that play to shoppers’ desire to save money, even if they often buy in bulk to do it.
All three of these membership-required warehouse chains made PLBuyer’s Top 35 Private Label Retailers list in 2012. Costco came in No. 3, while Sam’s Club, operated by Walmart, came in at No. 11. Further down the list at No. 33 was BJ’s Wholesale Club.
Membership fees are $45 for basic membership at Sam’s Club, $50 at BJ’s, and $55 at Costco. Each of the three clubs also have a premium membership tier that costs about double and provides members with various perks, such as cash back based on purchases, extended store hours, and additional discounts.
Costco Wholesale Corporation currently operates 627 warehouses, including 449 in the United States and Puerto Rico, 85 in Canada, 33 in Mexico, 24 in the United Kingdom, 15 in Japan, nine in Taiwan, nine in Korea and three in Australia.
The company has announced it will open 150 stores in the next five years, with two-thirds of them planned internationally, and plans to open up to an additional nine new warehouses prior to the end of its fiscal year on Sept. 1, 2013.
Costco’s private label brand is simply Kirkland Signature, which extends across food and nonfood categories.
According to the June 2013 issue of The Costco Connection, the retailer’s magazine, new private label products arriving in store include a 35-pack of Kirkland Signature Diet Green Tea with Citrus, a 60-bar pack of Kirkland Signature Soft & Chewy Granola Bars, and a two-pack of Kirkland Signature Girls’ Leggings.
Costco’s operating results, through May 12, show net sales increased by 8 percent in both the third quarter and first 36 weeks of fiscal 2013, from $23.55 billion to $21.85 billion for the quarter and from $65.54 billion to $71.10 billion for the first 36 weeks.
In announcing earnings for the company’s fiscal third quarter, Costco Chief Financial Officer Richard Galanti was asked about the potential future growth of the company’s Kirkland Signature private label line.
“I think it’s still in the low to lower mid 20s, but it keeps going up incrementally,” Galanti said of private label share, according to transcripts of the earnings call with analysts by Seeking Alpha. “Part of that is the increased penetration of some of those items overseas, where whatever extreme value we are, it’s even more extreme on those kinds of things. We have items that do $2,000 and $4,000 a pallet position in the U.S., that do five and 10 times that in some of the Asian countries, simply because it’s a great value on great stuff. And we can be even more extreme over there versus brands.”
Whether the categories expand or not, though, Galanti said organic growth within current Kirkland products could help increase share.
“It always amazes me when individual food items, the cashew clusters or something innocuous like that, is a $15 million item and $25 million and $30 million a year later,” he said. “All of a sudden you’ve got those types of things out there. So, you know, I think [private label share] will scale slowly through the 20s and upward, but it’s not like we have a concerted effort to try to get to a number by next year.”
He added that most of the basic private label moves in areas such as paper and water had been made, but there were plenty of categories such as apparel and electronics that could be explored.
“So yeah, we continue to look at different areas, and in this past year, I know we’ve put it on some women’s exercise apparel, active wear, which has been very successful,” he said, according to the Seeking Alpha transcripts. “I know we have several men’s summer items, whether it’s shorts, performance polo shirts. And so it’s food and nonfood. I don’t see any discussion of putting it on a television or anything anytime soon. But certainly there’re a lot of categories. You know, all the low-lying fruit, paper goods, water, those are all done. But probably the lowest lying fruit in the last few years was probably the disposable diapers.”
Sam’s Club, a division of Wal-Mart Stores, Inc. is the nation’s eighth-largest retailer with 620 stores in the U.S. and Puerto Rico. This warehouse club has 47 million members in clubs across the U.S., as well as in Brazil, China and Mexico.
At the beginning of 2012, Sam’s Club announced the addition of vitamins to its private brand Simply Right. Sam’s Club’s Simply Right brand has also made donations to Vitamin Angels, a non-profit organization dedicated to increasing availability, access and use of micronutrients among at-risk populations in need.
In October, 2011 Sam’s Club pledged $20,000 of Simply Right pet food, supplies and Sam’s Club gift cards to four U.S. animal shelters in need of support following recent natural disasters.
The Simply Right brand was added in September 2011, along with the new Artisan Fresh and Daily Chef private labels. The brands provided a fresh look to popular items previously known as Member’s Mark brand in selective categories. The Member’s Mark brand remains in everyday needs categories, such as laundry care, paper products, trash bags and cleaning products.
The Simply Right line includes healthy, gentle personal care and wellness products for the entire family; the Artisan Fresh line includes prepared foods such as
“Our mission in introducing Simply Right, Artisan Fresh and Daily Chef brands is to delight members with high quality products at an extraordinary value."
pies/bakery goods, fresh breads, marinated meats and other dinner solutions; while the Daily Chef line includes affordable everyday foods such as pasta, dried fruit, frozen vegetables and chicken.
“Our mission in introducing Simply Right, Artisan Fresh and Daily Chef brands is to delight members with high quality products at an extraordinary value,” said Maurice Markey, vice president of proprietary brands for Sam’s Club in a press release. “We realized that our members prioritize consistent, reliable quality above all other product attributes. It is important that we have the highest quality brands – whether national brands or exclusive proprietary brands – because our members trust Sam’s Club to deliver consistent quality at a great value every time. We encourage members to experience our new brands on their next shopping trip to Sam’s Club and provide feedback at SamsClub.com.”
Additional private labels include Bakers & Chefs, and spirit brands Calle Azul and Rue 33.
The retailer has offered free samples in the past to promote its Sam’s Club’s Simply Right diapers, wipes and formula. In March 2012 Sam’s Club introduced a bimonthly magazine, Healthy Living Made Simple. The 8 million member circulation magazine was the first warehouse club publication solely dedicated to health and wellness issues.
BJ’s Wholesale Club Inc., operates 200 clubs and 113 gas stations in 15 eastern states in the U.S., stocking more than 7,000 items.
Through local clubs, corporate sponsorships, in-kind donations, volunteerism, national programs and the BJ’s Charitable Foundation, BJ’s supports and enhances programs that provide vital services within each community it serves.
This year, BJ’s launched its new store brand “Generation Earth” in February featuring paper products, and in June, BJ’s announced the extension of the line.
Products under the Generation Earth label fall into two segments, “good for you” and “good for the environment” and categories include not only paper, but also cleaning supplies, laundry care, baby, pet, over the counter and health and beauty.
The brand mission of the Generation Earth products is to develop and sell goods that are responsibly sourced and manufactured, using fewer resources and without the use of harmful ingredients.
“We wanted to make a difference at BJ’s with the Generation Earth brand, as a company we believe we have a responsibility to help preserve the Earth for the many generations to come,” said Kristine Modugno, assistant vice president for BJ’s Private Label Division. “I’m proud of what BJ’s is doing for our environment and believe that our members will be thrilled to know that the company is doing its part to preserve the environment.”
Generation Earth “good for you” products are “about using what is good and natural from the earth to do good for you and your body.” Categories in this segment include health and beauty and over the counter products.
Generation Earth “good for the environment” items are designed to be ecoefficient. Each product features a story to educate members on why they are better for them and the environment. For example, the story for the paper goods category explains how these products are “tree positive” – for every one tree used; two are planted in its place.
In addition to Generation Earth, BJ’s has five more focus brands: Wellsley Farms for dairy, produce, deli, bakery, prepared foods, and grocery; Earth’s Pride for organics and all natural dairy, produce, bakery, frozen, grocery, and pet products; Berkley & Jensen for household/consumables, grocery, pet, OTC, HBA, and frozen; Living Home for cookware, outdoor, bed, bath, seasonal, and furniture; and Lanesboro for men’s and women’s apparel.
Last March 16 through June 15, BJ’s held the Berkley & Jensen SAS Paper Towel “Thank You for Your Feedback” sweepstakes, where shoppers could enter by completing a survey by following the QR Code found on Berkley & Jensen Paper Towels. One winner was awarded a $200 BJ’s gift card.
In April 2012, the retailer announced the roll out of “Farm to Club,” its locally grown produce program, to all BJ’s clubs. The active and growing program provides BJ’s members with fresh produce from their state’s local farms. Fruits and vegetables in the Farm to Club program are clearly marked with a special “Farm to Club, Locally Grown” seal.
“As a buyer at BJ’s, I strive to provide the very best produce for members,” said Rob Johnson, produce buyer for BJ’s Wholesale Club, in a press release. “The Farm to Club program is very good for both the members who buy the local fruits and veggies and the farmers who are growing our food.”
BJ’s also announced in spring 2012 its new sustainable seafood policy ensuring all seafood products sold in BJ’s Wholesale Clubs are sourced from seafood suppliers identified as sustainable or on track to meet sustainability standards by 2014. The company’s new seafood guideline for wild-caught fish ensures fish are caught legally and that suppliers remain within their catch quotas. Additionally, the guidelines encourage fisheries and suppliers to use up-to-date technology that makes harvesting less destructive to other aquatic species, such as dolphins and turtles, and less damaging to ocean habitats.
For farmed fish, suppliers must limit the use of chemicals, provide fish plenty of room to swim, and implement safeguards that prevent farmed fish from escaping or affecting wild fish.
With thousands of products to ship and display, pallets play a large, visible part in club store business.
In club stores such as Costco, BJ’s, and Sam’s Club, most products are displayed to the consumer on shipping pallets. PLBuyer had the opportunity to learn more about the role pallets play in retail from Adrian Potgieter, senior vice president of sales for PECO Pallet in Irvington, N.Y. The following is an excerpt from our email interview with Potgieter.
PLBuyer: Do you work with club stores?
Adrian Potgieter: Since PECO Pallet was founded in the late 1980s, we have had a long history of working with club stores and private label manufacturers. Because we consistently deliver outstanding quality pallets and service, PECO has become a preferred pallet provider for Costco, which now requires that all shipments be delivered on block pallets.
PLB: What does a smaller retailer need to know about pallets?
Potgieter: PECO Pallet understands that retailers are a key component in the pallet rental cycle, and we work hard to build long-term relationships with distributors and retailers both large and small. Unlike the competition, PECO promptly picks up loads of empty pallets so they don’t take up valuable warehouse space and become a nuisance. Our online tool, RED<>LINK®, makes it simple for retailers to report full truckloads of empty pallets and request immediate pick-up. PECO also carefully controls our pallet pool to avoid pallet loss or damage, so we don’t need to charge for lost pallets.
PLB: What are the different options for pallet materials?
Potgieter: We currently produce pallets that are made from Southern Yellow Pine or Douglas Fir for superior strength & durability. Other common wood species for pallet production are whitewoods (Pine, Spruce and Fir) as well as mixed hardwood species such as Oak and Maple.
PLB: What challenges are there with sourcing 100 percent sustainably forested pallets?
Potgieter: While there is an increased awareness and interest in sustainability, there remain a number of challenges to sourcing sustainably forested pallets, including:
• Not enough lumber sources are sustainable certified to meet market demand
• Those that are certified charge a premium for their certified lumber
• The premium is more than what most pallet users will pay for a sustainable pallet
PLB: Where in the U.S. does the lumber come from?
Potgieter: Fir is generally produced in the Northwest and Canada; Southern Yellow Pine is grown in the Southeast; Spruce comes from the Rocky Mountains and Canada.
PLB: How does kiln drying the pallets allow you to not use chemical treatments?
Potgieter: Chemical treatments are primarily used to kill insect infestation and mold. Kiln drying performs the same functions through the application of heat. Kiln drying also draws out the moisture from the pallet and reduces the overall weight.
PLB: What are the advantages of block pallets over conventional stringer pallets?
Potgieter: Block pallets, with the top deck boards supported by nine solid blocks of wood, are much stronger and more durable than stringer pallets. With a total of 26 boards and 138 fasteners per pallet, PECO pallets are designed to hold up to 2,800-pound loads (edgerackable). Block pallets also have better top deck coverage (87 percent) and are safer to use in overhead racks. Unlike stringer pallets, block pallets can be accessed safely from all four sides, which makes them easier to position when loading and unloading trailers, improves shipping density, and reduces freight and handling costs.
PLB: What technology is used in the pallet business?
Potgieter: Red<>Link®, PECO’s proprietary online pallet management tool, is easy to use and provides a wealth of information for our customers. Users can log in 24 hours a day to place orders, check delivery dates, request pallet pickup, view invoices, or generate any number of useful “at-a-glance” reports. Our systems integrate seamlessly with EDI to place orders and report transfers in and out. By providing our customers easy access to the same information PECO uses, we can work together to manage pallet flows, identify problem areas, and find new ways to reduce costs. The PECO Pallet Operations team also uses sophisticated transportation management software to optimize loads and reduce transportation costs.
PLB: What are the challenges in pallet maintenance?
Potgieter: Different white wood pallet manufacturers and recyclers all have different construction and repair standards, resulting in a wide range of pallet quality and condition. At PECO Pallet, we maintain the consistent high quality of our pallet pool by enforcing extraordinarily strict guidelines for maintenance and repair. We work closely with all the pallet depots in our North American service network to ensure reliable quality standards. Every time PECO pallets are cycled through one of the depots, they are individually inspected and sorted. Depot employees all work from PECO’s Inspection Guidelines to ensure consistent quality standards. Pallets that are deemed “Ready-for-Use”are cleaned and returned to the pallet pool. Pallets judged as “Work-in-Progress” are repaired before being reissued.
PLB: What else do retailers and suppliers need to keep in mind about pallets and pallet construction?
Potgieter: Pallet quality can have a direct effect on the safety of both people and products. Conventional whitewood stringer pallets are often in such poor condition that splintered boards and protruding nails create a real risk of employee injury. PECO’s block pallets, however, are carefully maintained and repaired to eliminate those kinds of problems. PECO’s sturdy block construction ensures that pallets can be safely stacked and loaded in high-reaching overhead racks. This reduces the risk of injury due to pallets (or products falling from above. We also work closely with our customers to be sure PECO Pallets work smoothly in automated processing lines, avoiding equipment jams that might also lead to injury or product damage.
PECO Pallet is a North American leader in pallet rental services and provides millions of its red wood block pallets to major grocery and consumer goods manufacturers throughout the U.S., Mexico, and Canada. PECO Pallet’s tremendous growth over the last decade reflects the company’s overall commitment to exceptional quality and genuine passion for customer service excellence. PECO is headquartered in Irvington, NY, and maintains over 550 service centers and manufacturing plants throughout North America. PECO Pallet will be at PACK EXPO - Booth #6358. Visit them online at www.pecopallet.com.
Club stores must keep in mind safety and appearance of the pallets they use.
Pallets play a huge role in club stores, since these massive retail stores merchandise their products directly on pallets. They aren’t just a way to transport private label products, but also a way to display them to the club store shopper. Here Lewis M. Taffer, chief marketing officer at iGPS Company in Orlando, Fla., tells PLBuyer in an email interview how pallets are an integral part of private label displays at mass merchandisers.
PLB: Are club stores receiving many different pallets from multiple suppliers or do they have their own pallet contracts?
Taffer: In general, manufacturers, not retailers, are the parties who contract with pallet suppliers. The club stores have authorized manufacturers to use the pallets of several suppliers.
PLB: Are there any special considerations for private label items and pallets?
Taffer: It does make a difference. Because club stores merchandise their products on pallets, the condition of pallets is important to them – both aesthetically and from a customer safety perspective.
PLB: What are the benefits of plastic pallets over wood?
Taffer: Plastic pallets have many advantages over wood. They are lighter and therefore it costs less to ship products on them. This savings ultimately makes its way to retailers, like club stores. In addition, because plastic pallets are more durable, they generally look much better than wood pallets, which tend to show their way more readily. Of particular importance, plastic pallets do not have nails or splinters, which can be safety issue.
PLB: Tell me about how iGPS pallets are sustainable.
Taffer: They are 100 percent recyclable. Any time an iGPS pallet is broken, it is ground up and molded into new ones. It’s “cradle-to-cradle” sustainability, with the polymer used indefinitely.
PLB: How far do pallets travel and what difference do plastic pallets make in travel costs?
Taffer: It’s difficult to generalize. However, plastic pallets are far cheaper to transport because they are lighter. iGPS Platforms weigh less than 50 pounds, while a multiuse wood pallet weighs 75 pounds or more.
PLB: Why is renting pallets over owning them beneficial to the customer?
Taffer: Renting is far more efficient. Manufacturers want to stick to making products, not buying, tracking and repairing pallets. Over the long run, renting is cheaper.
PLB: What else do retailers and suppliers need to keep in mind about pallets and pallet construction?
Taffer: iGPS platforms are not only cheaper to ship, but also reduce product damage, and are safer for workers.
iGPS provides the world’s leading companies with the most advanced and cost-efficient pallet-based solutions available today. The company’s lightweight, 100% recyclable plastic pallets and associated technologies yield dramatic savings in transport and production costs – as much as $4 per pallet load –and provide new levels of operating efficiency, product security, platform hygiene and customer satisfaction. Ideally suited for automated environments, iGPS’s platform puts an end to broken boards and protruding nails that can damage equipment, endanger workers, jam production lines and litter workplaces. For more information please visit www.igps.net.