New York -- Consumer products executives expect their highest growth to come from the warehouse club channel compared with any other retail sales channel over the next three years, including mass merchandise, grocery, and e-commerce, according to new research from Deloitte.
Nine-out-of-10 (89%) of consumer package goods (CPG) executives Deloitte surveyed expect their company's sales through the warehouse club channel to increase during that time. This channel is outpacing grocery in CPG companies' focus, as less than half (49%) expect grocery sales to increase during that three-year period, while one in six (18%) expect sales in the grocery channel to decline.
“Consumer products companies are responding to the increased sales and branding opportunities in the warehouse club channel, particularly in expanding segments traditionally dominated by grocery and mass merchandise channels,” said Pat Conroy, vice chairman and consumer products leader, Deloitte LLP. “Club retailers have been remodeling existing stores, including allocating more space for food – particularly organic, healthy and fresh offerings – and personal care products. These retailers also continue to provide a variety of services and benefits to members – whether it is for personal consumption or for the member's business.”
Industry executives believe that club stores are increasing their appeal to a wider array of consumers. Most of the CPG executive respondents believe that warehouse club members are making more trips (77%), spending more at club stores (78%), and are finding these stores more appealing than just three years ago (63%).
Deloitte's report also found that channel conflict with traditional grocery and mass merchandisers – left unmanaged – will rise. Most executives surveyed (71%) believe that pricing differences between warehouse club products increase channel conflict.
In addition to increased channel conflict, Deloitte's study found that the warehouse club channel presents CPG companies with additional challenges, including club-channel-specific product and packaging, pricing and margin management, and supply chain.