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Wholesale Giants

by 
Ethan Chernofsky
 on 
March 2, 2021
Wholesale Giants

Prior to the pandemic, Costco has been among the most consistently strong performers in all of retail with year over year visit growth essentially a given. On the other hand, BJ’s Wholesale had been the clear third wheel in the battle for wholesale club supremacy. Yet, since the pandemic, visits to the former have been up and down, while BJ’s has been one of the most impressive players with near ongoing year-over-year growth.

So what does it all mean and how did traffic unfold in late 2020 and January 2021?

Wholesale Battles

Costco kicked off 2020 with its usual strength before watching the pandemic shift shopping behaviors and throw visits down year over year. The result was an up and down rest of 2020 where only four of the months showed year-over-year visit growth. Critically, though all four of those months came in the second half of the year showing that as the wider retail sector recovered, Costco re-gained its footing in overall visit growth. Even more, the likely only reason Costco dipped in late 2020 and early 2021 was a combination of inclement weather and surging COVID cases.

BJ’s, on the other hand, followed an up and down 2019 with a stellar 2020 where every month showed major year-over-year visit growth except pre-pandemic January. And the trend sustained throughout the year, with the brand averaging 13.8% monthly year-over-year growth in visits in the second half of 2020. This continued into 2021 with visits up 13.8% year over year in January. 

Yet, a deeper look is critical especially when trying to contextualize Costco’s performance. For example, while year-over-year visits in January 2021 were down 2.3%, when comparing the same month with January 2019, visits were actually up 0.9%. So, while Costco is certainly seeing different visit patterns, when looking at performance through a longer-term lens, the strength is still obvious.

And that comes into greater focus when we compare the declines in overall visits alongside declines in visits per visitor. Looking at November 2020 through January 2021, Costco saw an overall visit decline of 1.7% during that period year over year. This is already impressive considering the rise in COVID cases in November and the inclement weather that hit key regions for the brand in late January. However, during this same period the number of visits per visitor dropped far more precipitously. So while visits were only down 1.7%, visits per visitor were down a far larger 28.9% year over year. 

This indicates that Costco is still seeing the heavy impact of mission-driven shopping, where visitors look to accomplish more with each visit driving larger basket sizes alongside fewer overall visits. But the gap between these two numbers is very important. A massive decline in visits per visitor alongside a fairly minor drop in overall visits shows that Costco may actually be stronger than it's ever been and that the brand is likely adding new members at a very high rate. If this is so, and considering the ‘stickiness’ of the membership club model, Costco can likely come out of the pandemic stronger than ever before. 

The conclusion that Costco is actually as strong, if not stronger, than it's ever been is further supported by visit share data. When looking at the visit share between Costco and BJ’s in January 2020, Costco held 87.7% of overall visits. In 2021, that number declined only slightly to 86.0% - showing that even amid BJ’s surge, Costco was still keeping nearly the same overall lead.

Moving Forward

The critical conclusion here is twofold. First, Costco performed exceptionally well during the pandemic and there is a very compelling argument to be made that the brand has never been stronger. Viewing visits within the visits per visitor and visit share context show that the brand is still benefiting from mission-driven shopping and likely adding many new members. The result should be tremendous excitement in the brand’s potential moving deeper into 2021.

The second conclusion centers around BJ’s Wholesale Club. The brand remains one of the most exciting, considering the huge leap forward made during COVID, but a real test remains on whether it can sustain that beyond the pandemic. On the bright side, it has many factors working in its favor. The value orientation is exceptionally compelling in periods of economic uncertainty like we expect to see in the coming years, and the membership club model is very unstable. Should BJ’s prove capable in building on this momentum, the potential for the brand’s reach should only grow.

Will Costco prove out the thesis that its strength has actually increased? Can BJ’s Wholesale continue to thrive?

Visit Placer.ai to find out.

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