BJ's Wholesale Eyes 30% Private Label Penetration Rate
Private label sales at BJ’s Wholesale Club currently make up more than 25% of its total business, and continued own brand momentum has officials with the retailer confident they will soon hit their 30% penetration rate goal.
During a recent investor conference call to review first quarter results, Bob Eddy, BJ’s Wholesale’s president and chief executive officer, said the retailer continues innovating with its Wellsley Farms and Berkley Jensen own brands as part of an effort to provide its members high quality products at “substantial” value.
“Our own brand sales penetration continues to grow each quarter,” he said. “Our sundries categories lead the way in areas such as paper and trash. In the first quarter, we launched our own food storage bags.”
An online review of BJ’s assortment of food storage bags found Berkley Jensen freezer gallon double zip bags (152 count) for $9.49, Berkley Jensen freezer quarter double zip bags (216 count) for $9.49, Berkley Jensen sandwich bags (580 count) for $9.49, and a Berkley Jensen food storage variety pack (340 count) for $11.99.
By comparison, Ziploc gallon freezer bags (152 count) seen on bjs.com were priced at $19.99, and Ziploc quart freezer bags (216 count) were priced at $19.49.
“This offering is a strong illustration of our capabilities and approach to own brands,” Eddy said. “Our research suggested that our members were seeking greater value than the national brands offer. Our member's response has exceeded our expectations, improving the category sales trend, with more than half of the sales coming from new members to the category.”
In developing the new private label food storage bag assortment, he noted BJ’s underwent extensive benchmarking and analysis and identified a partner to develop high-quality products that are comparable to national brands while offering a value of more than 30%.
Ironically, as BJ’s sees sales growth of its private label assortment across the store, those gains in the nearterm are having a negative impact on comparable store sales, a key fiscal benchmark used to gauge a retailer’s financial health.
“Yes, it's usually a drag on comps,” Eddy said about the growth of private label product sales. “Certainly, there are cases where members are getting into a new category for the first time. But a lot of the own brand increase is just switching from brands given they tend to be 30% cheaper. But, they are about a thousand basis points more accretive to us from a margin perspective. For every percentage point of growth, it tends to be a little bit of a comp headwind, but it tends to give us 10 basis points of margin rate growth as well.”
As private label product sales growth, BJ’s also continues to expand its footprint. The company expects to open 11 additional clubs in the back half of its fiscal year that include entry in several key markets such as Louisville, Knoxville, Southern Pines and Myrtle Beach.
Additionally, the retailer will also grow in core markets with two new stores forthcoming in the New York Metropolitan Area, and four new locations in Florida.