Warehouse Club opens: How the members-only wholesale model works

SINGAPORE - The new Warehouse Club by NTUC FairPrice is based on a warehouse wholesale business model popularised by US chain Costco.

The 80,000 sq ft store at Joo Koon Circle is the first to apply the concept in Singapore.

How is it different from the usual supermarket experience?

1. Members only

Opening a discount store, then making your customers pay up front to enter seems counter-intuitive, but it works for Costco because not only does it have a steady source of revenue from membership fees, but it also encourages customers to return once they have paid for a membership.

According to Costco, which has more than 600 stores worldwide, 50 million people are Costco members, and its cheapest membership fee costs US$55 (S$72.80) a year.

Membership for Singapore's Warehouse Club is S$50 a year for all, and S$35 a year for NTUC Union members. To apply for membership, go to www.warehouseclub.com.sg or level 2 of the Warehouse Club.

Costco also has corporate memberships catering to businesses. So far, Warehouse Club membership is only for individuals but it will be looking at providing corporate membership soon, a spokesman said.

2. "Industrial cheap"

Industrial chic decor is quite hip nowadays, but the warehouse-like atmosphere at retail outlets like Costco is deliberately designed to project value. Of course, the prices have to deliver too.

Similarly, the interior at Warehouse Club looks pared down, with prices prominently displayed. Aluminium-topped cashier counters, exposed pipes on the ceiling and the lack of "mood lighting" shout no-frills.

3. Bulk purchases, and smaller product range

Such stores carry a smaller variety of products but offer them in greater quantities to provide greater savings.

Warehouse Club now carries more than 4,000 products. A typical supermarket carries between 15,000 and 20,000 items. A hypermarket carries about 20,000 to 30,000 products.

The store offers products sold in larger than usual packages such as bulk buys, value packs and multi-packs. These can be good for large families, parties or to share with friends.

It has the usual food and groceries like fresh and frozen meat, vegetables and fruit, seafood, rice, cereal; and household consumables like detergent, shower gels and cleaners. It will also offer exclusive products like Kirkland Signature, a popular housebrand of Costco.

4. Boxes for your shopping

To promote recycling, the store will provide cardboard boxes for shoppers to carry their groceries home in. Customers can also buy recyclable bags for their shopping. They also provide plastic bags at no charge.

5. Low prices

Ultimately, the draw lies in the prices.

At Costco, no product can be marked up by more than 15 per cent, according to the New York Times. In contrast, supermarkets in the US generally mark up merchandise by 25 per cent.

Here, the Warehouse Club promises discounts of around 20 per cent. Here are some examples provided by the store:

Kirkland Kettle Chips 907g (WHC price: $8.90) vs Kettle Chips Sea Salt 142g (NTUC FairPrice: $4.95)

Savings: 70 per cent

Kellogg's Frosted Flakes 1.7kg (WHC price: $14.70) vs Kellogg's Frosties 300g (NTUC FairPrice: $5.25)

Savings: 50 per cent

Nabisco Ritz cracker 3lb/1.60kg (WHC price: $5.00) vs Kraft Ritz cracker 300g (NTUC FairPrice: $2.14)

Savings: 50 per cent

Emerald Half-Shell scallop 1kg (WHC price: $9.90) vs Okeanoss half-shell scallop 500g (NTUC FairPrice: $6.30)

Savings: 28 per cent

Meiji Milk 2 packs x 2 litres (WHC price: $9.95) vs Meiji Milk 2 packs x 2 litres (NTUC FairPrice: $11.90)

Savings: 17.6 per cent

This article was first published on December 8, 2014.
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