Glenn Llopis and WCF recently hosted a seminar on the warehouse club industry at the 2000 Boston Seafood Show. An excerpt from materials prepared by Llopis for the seminar appears below. Although this information was prepared with seafood manufacturers in mind, there are a number of strategic points which apply to all manufacturers. Manufacturers of all products should consider these points when developing and presenting a club program.

The opportunity exists for manufacturers to introduce new sales, marketing and merchandising standards in the club industry seafood category. Warehouse club buyers are waiting for someone to provide leadership in a category that has tremendous growth potential. Seafood manufacturers must be prepared to understand the following club concepts: value-added, added-value, packaging, channel support, supply chain management, regional selection, product rotation and warehousing.

Value-Added - This term is defined as features or benefits that are associated with your products. For example, quick preparation (convenience), proprietary flavor profiles (point of differentiation), higher percentage of fish (value) and free recipes through a web site all add value to the product.

Added-Value - This term is defined as features or benefits associated with a company's management. For example, offering the warehouse club industry a new marketing outlook to increase consumption, a raw material supply strategy to guarantee continuous availability and everyday competitive pricing are all components of a successful club program.

Packaging - Seafood manufacturers must develop a package design strategy to capture presence and attention on the shelf. Historically, seafood manufacturers have placed loins and blocks into one-color plastic bags. This has lead to several instances of product "crystallization" that is both unattractive and can lead to product spoilage. Regardless of whether seafood manufacturers want to build a national brand, the image they project for their products must be positive and attractive.

Support Channel Strategies - Seafood manufacturers need to obtain knowledge and gain expertise about the club operating environment. This is the single most important tool for a seafood manufacturer that wishes to sell its product to the clubs. Knowledge and understanding of the warehouse club industry comprise 40% of the selling process. The remaining 60% requires product strategies that involve the development of supply chain management, pricing, new products and seasonal rotation programs. Extensive location level research, including the evaluation of product assortment, merchandising and packaging, is necessary to acquire warehouse club knowledge. After a program is sold, field-level audits of your product should be part of the category management services that you offer.

Supply-Chain Management - Based on discussions with several club buyers, their most pressing concern lies with "continuity of supply" and "quality management," not just price. Seafood manufacturers must show that they can overcome these concerns when meeting with buyers. As an example, Power Insights recently participated in a seafood category sales appointment with a club buyer. During this appointment, the club buyer addressed the steps that had been taken to enhance the quality and value of its existing seafood product assortment.

Regional Selection - For seafood manufacturers, the warehouse clubs offer a regional demographic profile that lends itself to marketing regionally specific products. In fact, the warehouse clubs are known for marketing products based on consumption profiles that force them to merchandise certain products in certain locations. Seafood manufacturers should take the time to understand where the warehouse clubs are located, as well as their regional flavor profiles. This will assist them with the selection of species, targeted flavor profiles and seasonal demand necessities to create a go-to-market strategy.

Product Rotation Programs - The warehouse clubs are experts at merchandising products based on demographic reach and consumption occasions. This is yet another innovative concept that the warehouse clubs have integrated into their purchasing strategies that separates them from supermarket and foodservice operators. The warehouse clubs have the ability to plan anticipated inventory turns and desired revenue and earnings for a designated sales period for a specific product. This purchasing strategy allows club buyers to identify vendors who can offer an attractive product offering that lends itself to seasonal or rotation program sales. While club buyers search for new "staple" items, the rotational programs allow them to keep the category looking new and serve to support the warehouse club "treasure hunt" that encourages members to shop the warehouse with greater frequency. The seafood manufacturer and its operating strengths and limitations lends itself to participation in product rotation programs. While staple items like shrimp and salmon are merchandised throughout the year, swordfish, tuna and Chilean seabass are more seasonal and support a rotational strategy. Seafood manufacturers need to create a program strategy that allows their products to be represented throughout the entire year. This allows club members to become familiar with their products and loyal to their brands. While the development of a rotational program sounds simple, it requires a well-defined supply chain plan. For the warehouse clubs, the importance of service through a strong warehousing and logistics plays a valuable role.

Warehousing and Logistics - Today's supply chain challenge is to optimize proximity to suppliers, customers and transportation. It is imperative for seafood manufacturers to understand how the warehouse clubs manage their logistics program to minimize costs, while maximizing service and operating efficiencies. Be careful not to service the warehouse club program like your existing retail and foodservice business. Leverage your current warehousing and distribution program where cost savings and a competitive advantage exists, but adapt it to work with club industry needs. For example, SAM'S Club recently announced that all vendors must convert all pallets to support the CHEP program. SAM'S Club noted that this was its attempt to "eliminate inefficiencies that add unnecessary costs" to the supply chain.