1.0 PESTEL Analysis
1.1 Political Drivers
- Pricing regulations: minimum markups need to be implemented to the selling prices for certain types of merchandise such as alcoholic beverages, tobacco, and gasoline.
- Political stability of major markets: political uncertainty impacts the expansion of retailers looking to operate in various regions or countries.
1.2 Economic Drivers
- Increasing international trade agreements
- Exchange rates and currency fluctuations: wholesalers and retailers are all subjected to the currency fluctuations when operating on an international basis. Operating in volatile markets makes a huge impact on their operations and revenues.
- Business cycle stage: in recessions, consumers tend to buy items they need for survival. They avoid making big luxury purchases such as TVs, sofas, and hot tubs.
1.3 Social Drivers
- Increasing demand for business social responsibility: consumers tend to increasingly support businesses that raise awareness and donate to particular causes, contribute back to the community, and treat their employees fairly.
- Cultural diversity: Businesses that embrace the cultural differences in various regions or countries helps boost sales and customer retention. A product that sells out in Canada may not perform well in Japan, so catering to the unique needs of different markets helps improve the businesses profits, reputation, and popularity.
1.4 Technological Drivers
- Business automation: many retail businesses offer self-checkout services to reduce labour costs and the need for cashiers.
- Use of POS systems: many retailers are making the switch from cash registers and computers to iPads and more accessible options.
1.5 Ecological Drivers
- Low-carbon footprint: sustainable packaging, using renewable energy, and eliminating the use of plastic bags have become a central factor to the operation of many wholesale and retail businesses. This increases their profits, brand image, and reputation.
- Climate change: retailers and wholesalers that sell produce items depend on optimal climate conditions to offer food products. The supply chain is negatively impacted if the weather does not allow those goods to be produced successfully.
1.6 Legal Drivers
- International laws: operating overseas creates implications that may not have arisen in the host country. It is important for retailers to follow the antitrust laws and avoid breaching any other laws to avoid getting into legal issues.
- Labour laws: Many retailers use the strategy of hiring numerous workers to avoid having to pay overtime wages. This allows them to save money on the cost of labour.
- Strategic Impact: on a macroeconomic level, these drivers allow companies to save money in the long run if the factors are favourable. As retailers starts to expand internationally and technologically, they start to contribute to the economy’s GDP by producing and selling, and their social responsibility increases.
2.0 Dominant Economic Features
The wholesaler club industry makes majority of their revenues from the membership fee, which is what allows them to price their products at such a discounted rate.
2.1 Sustainability
- Consumers tend to invest in and support businesses that are concerned for the environment and take the initiative to be eco-friendly. See Corporate Social Responsibility.
- Many companies try to reduce the amount of lighting used by installing energy-saving bulbs, fluorescent lamp bulbs, and LED light bulbs
- Sourcing food products from responsible and environmentally sustainable sources also plays a part in the seafood and animal welfare sector.
- Using recycled boxes instead of plastic bags reduces the amount of plastic usage
2.2 Logistics
- Working with the suppliers to make greater usage of the sales-floor-ready packaging, changing the container shapes from circles to squares for easier transportation, and stacking units on the sales floor contributes to the efficiency of the logistics
- The use of docking depots as distribution points to receive the container based shipments increased efficiency as the containers were then shipped out to individual warehouses
Size of the wholesaler club industry: the wholesale club and warehouse segment of retailers made around $172 billion in 2015. There are over 1440 warehouses across the United States and Canada
Among the top three competitors, Costco has a 59% share of the warehouse clubs in the U.S. and Canada, Sam’s club has 34% and BJ’s Wholesale Club has 7% (Costco Wholesale, C-41).
The level of differentiation among majority of the wholesalers is limited, since they only tend to stock up on a few items per category. Costco, Sam’s Club, and BJ’s Wholesale sold high quality, brand name merchandise at discounted prices. The only specific differentiation that existed was the private labeled goods sold by each wholesaler (Costco Wholesale, C-41).