Warehouse Clubs Ignore Customer Relationships at Their Peril

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By Jeff Kagan
May 13, 2016 7:00 AM PT

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Like many, I have a love-hate relationship with warehouse clubs like Costco, Sam's Club and BJ's. I've criticized them several times over the years, but it's worth noting that some of these clubs have been improving. Others not so much. I have some ideas about what these companies are doing right and wrong, and how they can fix things to improve customer relationships, sales and profits.

In general, wholesale clubs are all very similar, once you get inside -- but for many, the front door is a problem. That's where customers are ticked off coming and going. They charge a fee for the privilege of walking through their doors and spending your money. They convince customers that if you are a member and buy huge boxes of stuff, then you will save big.
They make customers think they are getting the deal of a lifetime with every purchase. All we have to do is pay a membership fee to enter Shangri-La, where our dreams will come true.

Customers Deserve Respect

The problem is, too many customers are wooed into suspending their disbelief -- including my darling wife. So, like a good husband, I accompany her on our regular journeys to Costco, Sam's Club and BJ's -- and every time I complain about the same things.
I must have higher expectations than some. I remember when I was young and worked in my parents' stores. I come from a retail family, and both my mother and father would tell me, "the customer comes first." They would say, "the customer is always right."
The reason they said those things is simple. A merchant can win an argument with a customer but lose the customer's business. Is that really the desired end result? No, of course not. Retailers want their customers to return, so it may at times be necessary to swallow one's pride -- even in situations when the retailer clearly is right -- in order to keep the customer. That's what builds retail business.
The warehouse clubs, though, make a habit of rubbing many customers the wrong way.
First, there's the membership fee. If this fee meant customers always saved money -- a little off on every purchase -- it might make sense. However, there typically are only a few items for sale in these stores that are bargains compared to regular retail prices.
So why are customers paying the entrance fee? Unless you spend a fortune at these stores, or buy only items that are heavily discounted, you might not even make up the membership fee. Customers who buy in large quantities for the discounts may find the products going bad before they're used -- savings out the window.
Second, there are no bags available at checkout. You can grab boxes, but then you have to figure out what to do with those boxes when you get home. What they should do is give the customer the option of buying bags at cost, or have one of their product companies sponsor ads on bags. That could even become a new profit center.
Three, there's the demeaning search at the exit. When you finish your shopping at Walmart, Target or any other store, you simply walk out the door. However, when you walk out of a warehouse club, you have to submit to a search. It feels like they're throwing you up against the wall and patting you down. It takes time and creates a bottleneck.
Four, there's a lack of customer respect and appreciation. For example, I recently went comparison shopping for a carpet cleaning machine at BJ's, Sam's Club and Costco. When I got to Costco, it was 7:00 p.m. -- closing time. However, there were still tons of customers in the store. Some were still shopping, while others were in line to pay. Others were wolfing down a giant slice of pizza or a foot-long hot dog.
So I figured I would just run in quickly, but no dice. I said I understood they were closing, and I promised not to buy anything. I just wanted to check to see if they had any carpet cleaning machines so I'd know whether to come back the next day.
I took 10 steps inside when a Costco employee jumped in front of me and scolded me, saying they were closed. I said, "look around." He said the presence of the other shoppers didn't matter -- they were closed.
Is that any way to treat a customer? The next day I went to Sam's Club and purchased a machine. I never learned whether Costco sold them or not. I didn't care -- my money would go to a competitor.

No American Express

A new complaint is that effective June 19, Costco no longer will accept American Express. I think Costco could be in for some bad news when that happens -- it's a big deal to many customers. Customers don't like to be told how they must pay -- they easily can give their business to another warehouse store.
Warehouse clubs should take all major credit cards -- but that would require caring about the customer's convenience, and that doesn't seem to fit with their business model.

Respect Customers or Lose Them

There's a lot of shortsightedness in today's retail environment. Maybe that's because the people who work at big retail outlets are not their owners. However, workers should be trained to cherish customers. Customers who are treated badly have other choices.
Make customers happy, and they'll keep coming back for more. In my parents' retail stores, we used to stay open late if a customer was in the store. We never let customers feel like they were putting us out. After all, those customers made a point of coming to see us. If we treated them badly, would they come back?
Warehouse clubs -- and in fact all stores -- should focus on the customers. They may have driven 20 minutes or more to get there. Any store should be happy about that. Stores should be flexible enough to stay an extra 10 minutes to make another sale -- and perhaps cultivate a longstanding customer relationship.