Competition among U.S. supermarkets is fierce, but it's nothing compared to the way warehouse club stores jockey for position.

Sales at the three club stores - Sam's Club (a division of Wal-Mart), B.J.'s and Costco - have grown an average of 9.7 percent annually since 1991, almost double the growth rate for traditional retailers, reports Warehouse Club Focus.

At this rate, estimates WCF, a bimonthly newsletter that covers the club store industry, the club stores will reach $97 billion in sales by 2004.

The main distinction between warehouse clubs and traditional supermarkets is that clubs require membership fees, which range from $30 to $100. But only around 10 percent of each club store's profit is derived from membership fees.

The key to the stores' success is that they identify their product mix and manage inventory so well that they are selling financed inventory, meaning that they sell product before they've paid their suppliers, notes Glenn Llopis, president and CEO of Power Insights, a consulting firm in Brea, Calif.

The company (on the Web at www.powerinsights.com) will hold a seminar this month in Los Angeles on how to market products to warehouse clubs.

"The clubs have become stringent in their performance requirements," says Llopis. "What is required for sales on an average week for a building is much higher. They carry fewer products every day to make sure they have met certain volume criteria."

The magic bullet to getting into the club stores is to develop a new product that the clubs want to carry, says Llopis. Once they pick up one product from a supplier, chances are they'll pick up additional products from the same company.

Legal Sea Foods Gourmet Foods in Cambridge, Mass., sells product to all three club stores. The company licenses with Legal Sea Foods Restaurants to market, distribute and sell some of the restaurant items into retail outlets.

"[Club stores] are living and dying on bringing in new items, which is great for us because we're still in the evolution of our development. It's a breath of fresh air for us," says David Passafaro, COO of Legal Sea Foods Gourmet Foods.

The warehouse club modus operandi has a proven track record, but that doesn't mean clubs don't have to keep competition from traditional supermarkets at bay.

Competition is the driving force behind the club stores' focus on perishable products like produce, deli and seafood.

"Fresh food departments in the clubs are extremely important," says WCF Publisher Michael Clayman.

WCF estimates fresh meat, chicken and seafood sales represented only 1.4 percent of total club store sales in 1999, but the stores have made it clear that seafood and other perishables will play an important role in the future.

B.J.'s, a 118-store chain with headquarters in Natick, Mass., has sold perishable items since 1991 and added seafood to the mix in 1999, says Eileen Kirrane, B.J.'s director of investor relations.

The company has been expanding its fresh-food departments to offer members the product assortment they'd find in any supermarket, notes Kirrane.

Costco spent $200 million on fresh seafood in 2000 and goes direct to the source for some of its seafood purchases, notes Llopis. The company is the largest net importer of Chilean salmon in the United States and also buys its smoked salmon direct from Norway, adds Llopis.

The club stores' heavy emphasis on inventory management is very similar to what seafood companies deal with every day, and club stores like to collaborate with companies that understand their business strategy, says Llopis.

"The opportunities for seafood companies are tremendous," he observes.

Even before emphasis was placed on fresh-food departments, club stores began selling smaller packaged items targeted to small families and designed to encourage more frequent shopping trips.

The club stores have emphasized their private-label brands in the past and will continue to add products to those brands, predicts Llopis.

He adds that the club stores will place more emphasis on gourmet foods in the future, and on non-food services such as business delivery and travel services, insurance and bank loans.

You name it, and chances are, warehouse clubs will be selling it.

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Power Insights Consulting is a Brea, CA based consultancy that specializes in warehouse club sales, marketing and organizational strategies for specialty food companies.