The future of club warehouses, once tipped to revolutionise UK shopping habits, is in doubt after operator Nurdin & Peacock pulled the plug on its Cargo Club format.
The operator has sold its three club sites to Sainsbury’s for £45m. The chain will turn one into a supermarket, another into the Savacentre format and sell off the third.
N&P says the Government’s planning laws, aimed at halting out-of-town retail developments, were partly to blame for the decision to pull out.
But a misguided policy on marketing and advertising contributed to the format’s poor performance, according to leading consultant Howard Jackson. N&P opened its first Cargo Club last year, but the format lost £7.4m in the first year of operation.
Jackson, former vice president for marketing at the Pace warehouse chain in the US, says: “The warehouse club format does not work in the UK. There are too few small businesses, which are the clubs’ life-blood.”
He says N&P operated a misguided marketing policy by spending £3m on the launch of its three clubs. About £1m (Register-MEAL) went on an ad campaign through D’Arcy Masius Benton & Bowles.
Jackson says: “The less you spend on advertising, the better. The marketing ploy is to promote the clubs through word-of-mouth and make it difficult for non-business consumers to get in. The harder it is, the more they will clamour for membership.”
Costco, which runs the warehouse format succesfully in the US, opened the first UK club warehouse in November 1993 amid a blaze of publicity. “You can take it as an indication Costco is not having a happy time that it was not the purchaser of Cargo Club holdings,” says a sector analyst.