By many metrics, warehouse retailers are enjoying a banner year. Major wholesale clubs like Costco and BJ’s have experienced significant membership growth and revenue increases attributable to paid memberships and positive sales performance. Consumers are expressing thriftier shopping tendencies and prioritizing value in a retail environment where prices remain elevated compared to just a few years ago, and warehouse retailers are reaping the rewards of that behavior.
From cost-conscious Millennial and Gen Z consumers to more affluent suburban shoppers who embrace the buy-in-bulk mentality, the wholesale club model is resonating. At the same time, warehouse retailers are raising membership prices, and as a result, they will be under more pressure to deliver value to their members. Digital innovations, an expanded rewards portfolio, and more advanced travel booking capabilities will help warehouse retailers continue to provide the value their members expect and maintain their performance advantage in the broader retail landscape.
A High-Performing Retail Segment
The numbers spell out this performance advantage. BJ’s saw 13% membership growth (in volume) during Q1 and recently reported a 9.1% YOY increase from membership fee income. Costco reported a 7.8% growth in paid memberships during their most recent quarterly earnings call. Overall, warehouse retailers account for 4.9% of total US retail sales, generating $626 billion in revenue in 2022 and growing at an annual rate of about 6% since 2007.
For warehouse retailers, these financial results are primarily driven by membership fee revenue, meaning incremental membership model changes can impact performance. For example, Costco reports that Executive Memberships make up over 45% of all paid memberships and account for approximately 73% of the retailer’s global sales.
This also makes the member experience a crucial component of sustainable performance. Warehouse retailers are approaching this in multiple ways, including introducing new digital capabilities. BJ’s now offers a buy online, pick up in-store service, for example, and Sam’s Club’s Scan and Go technology has seen a 50% increase in adoption over the last three years.
A Better Travel Rewards Experience Can Be the Ticket to Market Differentiation
However, where member-based retailers can most distinguish their member experience is through their rewards programs. For warehouse retailers already providing basic travel rewards, offering a booking experience comparable to major OTAs can boost interactions and customer engagement.
According to our survey of US warehouse/wholesale club professionals as part of our report, The Benefits of Belonging: An Analysis of Membership-Based Organizations, 93% of warehouse club loyalty programs offer travel booking capabilities, and 61% offer redeemable travel rewards. However, 59% of warehouse club members said they would book travel more frequently if their club offered higher-quality travel options, suggesting that these capabilities still lag behind what consumers can find on the open market.
How Can Warehouse Retailers Enhance Their Paid Membership Programs?
There are a few paths warehouse retailers can take toward creating more engaging rewards program experiences for their members.
- Improve the travel rewards user experience to include streamlined, feature-rich booking processes, increased options, dynamically presented offers and suggestions, and a cohesive, branded user flow. Implementing a travel booking platform with personalization capabilities will deliver results; our survey found that 55% of warehouse club members would like to receive personalized offers on bundled travel packages from their loyalty programs.
- Expand the reward portfolio beyond transactional rewards and provide members with a broader variety of non-transactional rewards. Ensuring members have access to benefits catering to their preferences can help warehouse clubs keep up with competitors and enhance the member experience. As 31% of warehouse retailers plan to offer new rewards for dining and grocery shopping, and 28% plan to expand their portfolios to include charitable giving, many are already exploring this pathway. But there is still clearly room for improvement.
- Target high-growth demographic groups most interested in using their rewards and membership programs: Gen Z and Millennials. These fast-growing generational cohorts seek value from the membership programs they belong to, exhibit high travel demand, and are more likely to check other travel websites first when booking travel than other generations. They also represent the most critical growth area for warehouse retailers; at Sam’s Club, for example, Gen Z membership grew by 63% over the last two years.
- Add more options to help members manage their budgets, including flexible payment options like installments. Our survey found that 13% of Millennials and 9% of Gen Zers would book travel more frequently through a membership program they belonged to if it offered more flexible payment options.
Finding a Loyalty Technology Partner to Navigate the Path Forward
Creating a better user experience, expanding rewards portfolios, targeting younger demographics, and implementing advanced payment tools can be challenging tasks for most warehouse retailers to tackle alone. Devoting the time and internal resources necessary to implement a best-in-class travel rewards and membership program is often inefficient for even the largest wholesale clubs.
Partnering with a technology provider like iSeatz, on the other hand, can help large member-based retailers support their objectives of profitably fulfilling members' needs and driving share of wallet. With the right platform and support, warehouse retailers can encourage deeper engagement among their members by offering a broader selection of travel and lifestyle rewards and a booking experience that rivals OTAs and other travel-specific platforms. This will drive more frequent interactions among members, enhance the overall member experience, and communicate the added value members expect.
Are you a warehouse retailer looking to enhance your rewards and loyalty strategies? Download our report to discover how your membership program compares to industry benchmarks, contact us today.
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To learn more about our work with travel and financial services brands and their loyalty programs, contact us here.