Going Clubbing
By Renée M. Covino from the December 2007 Convenience Store News for the Single Store Owner
Many single-store owners are bypassing wholesalers and DSD vendors,
opting to purchase a majority of their goods from wholesale clubs.
On any given day before opening their Lincoln Market convenience store in Denver , Leo Perino or his business partner, Dennis Parpinez, make an important morning pit stop — a quick trip to Sam’s Club. It’s a near-daily fill-in ritual that has now become vital to their business.
Sometimes, it means picking up cartons of cigarettes. Other times, it means grabbing cases of beverages, canned foods, motor oil or even a bundle of toilet paper. Whatever they notice is running low the night before, that’s what they’ll pick up the next morning on their way to work. Shopping at the warehouse club has become the last thing they think about before they close the store at night and the first thing they do the next business morning.
Perino and Parpinez are far from alone in this purchasing trend. Single-store owners across the country are realizing both the cost and convenience advantages to purchasing a majority of their inventory from wholesale clubs, rather than through traditional wholesalers and direct-store-delivery (DSD) vendors. As long as there is access to a club nearby, many independents will at least try it out.
It is the convenience aspect, more than anything else, which has the pair hooked. “We tried Costco first, and we used to go there quite a bit, but it was farther away — eight miles in one direction — and so we didn’t renew our membership,” Perino said. “We now know Sam’s is a better deal simply because it’s closer and on the way.”
He admits that they don’t follow prices too closely, and while Perino suspects Sam’s is probably cheaper for most of the items they buy there, he’s not sure by how much. “It’s not about price comparison. It’s about saving us a hassle,” he said.
It’s also about the fact that some vendors are backing in extra costs for delivery. “Everything is edging up on us with the rising gas prices,” Perino said. “Some vendors are now trying to throw fuel surcharges on us.” With the convenient location of the Sam’s Club in between his home and his business, Perino is very aware that he incurs no extra gas costs to pick up items the store needs.
Additionally, he likes that by using the Sam’s Discover Card, “we get 2 percent back, so that adds up to big money. We just apply it to our purchases at the end of the year.” Direct cost savings is the primary reason why Paul Giansiricusa, owner, with his wife, Donna, of Ideal Food N’ Fuel in Tarpon Springs, Fla., shops at his local Sam’s Club to stock some of the merchandise in his store. He’s calculated price savings to be at least 10 percent on most items he purchases, and estimates that approximately 20 to 25 percent of the store’s inventory comes from Sam’s. Like Perino, he selected Sam’s because it’s the closest wholesale club to his store.
“My biggest category from Sam’s is tobacco items — cigarettes are a big part of the savings at a difference of 40 to 60 cents a carton, which is significant,” Giansiricusa maintained. “Plus, I can’t buy them through McLane Co. or H.T. Hackney.”
Beverages, including single-serve bottled water and soft drinks, also score high on the list of products Giansiricusa purchases from the club. So do bag-in-box sodas for fountains, which he finds discounted at Sam’s. “At Sam’s, it costs me about $57 for the five-gallon size. Through Coke or Pepsi, I’d pay about $77,” he said. “That’s significant money.”
Giansiricusa also is impressed with the club’s packaged pastries. “I can buy a Danish [pastry] from Sam’s for 35 cents, a Hostess [cake] for 78 cents, and sell them each for about $1.19,” he said. “We’ve calculated that many items like this can save us a lot of money.” Sam’s garners praise for these and other “basics.” According to Giansiricusa, “They don’t have full lines of products, but they have the biggest sellers. Like in beverages, they have Pepsi, Coke and Mountain Dew; they don’t have a Mug Root Beer or a certain type of orange [soda], but we can buy the main flavors.”
Like other single-store owners that utilize the wholesale clubs for purchasing, Giansiricusa started out on a smaller scale, and then quickly found the need to ramp up his number of trips. “We used to try and make it a once-aweek event, but now, that’s impossible. We’re up to three days a week,” he said. “Weekly trips were getting to be in the $4,000 to $5,000 range, and it was a lot of work and taking too much time per trip. They’re only 10 to 15 minutes up the road, so it’s easier to go more frequently.
“Plus, if we forgot something, like a particular brand of cigarettes, our customers would have to wait almost a week for us to replenish. Now, we’re there almost every other day, so customers aren’t waiting as long for items.”
Eventually, Giansiricusa purchased a van strictly for the purpose of going to Sam’s Club and more easily transporting back the big items, such as cases of beverages, canned goods, etc. He even put his night shift manager in charge of the replenishment trips, which he makes during the day when he’s not working in the store.
