They are the warehouse clubs, sometimes referred to as “cash and carry” stores or simply “club stores,” and as a channel, they are in quite the enviable position lately. Collectively and individually, analysts have taken notice of the warehouse clubs’ strength at a time when so many other retailers are struggling.

Costco, the sales leader, had a 6 percent jump in comp store sales for June; this beat Wall Street’s estimate of 5.8 percent, according to Reuters. What’s more, the average customer transaction rose 3.5 percent during the month, Costco reported. Product segments with the strongest sales included computers, televisions, jewelry, deli items and frozen foods. Costco is also the largest retailer of wine in the country. Last fiscal year it sold $390 million in wine, according to the company, or nearly half the U.S. total.

Wal-Mart-owned Sam’s Club, with the highest number of units (579 as of Jan. 31, 2007) but second to Costco in annual sales, saw the biggest comp store gains in June at 9.6 percent. The company has made a splash of its brand “reinvigoration” — building on its foundation by deepening relationships with small business owners and broadening its consumer appeal by offering items with higher quality and uniqueness. It has specifically highlighted “affordable luxury” consumables such as its bakery’s new bistro cake, covered in authentic, rich ganache. Like its parent, Sam’s is a price leader, and charges no more than 12 percent markup on all items (others are typically in the 14 percent range, some going as high as 18 percent on certain items).

Channel Leaders*
Chain	2006 Annual Sales (in billions)	% change (2005-2006)
Costco Wholesale Corp.	$60.1	13.6%
Sam’s Club	$41.6	4.5%
BJ’s Wholesale Club Inc.	$8.5	7.2%
Sources: Company reports and STORES magazine

Meanwhile, No. 3 player BJ’s was not that far off Costco’s June comp store sales increases — with 5.3 percent gains. BJ’s attributed 1.4 percent to gas sales, which the company generally prices below average.

This is a successful trend across the entire channel of late — by accepting a lower profit on gas sales, more traffic is driven into club stores.  

For BJ’s, traffic increased by 2 percent in June, and the average transaction rose 3 percent, excluding the deeply discounted gasoline. BJ’s food sales, which the company reports as 60 percent of its sales, increased 6 percent, its strongest increase in two years.

But life’s essentials are not the only focus of the channel. Typical customers, which have the highest average incomes of any retail channel, often speak of not being able to leave the clubs without spending $100 — or more.  

Even Sam’s Club, with Wal-Mart’s low-price focus as its heritage, is still completely savvy to a typical club customer’s scenario of being able to buy “extra luxuries.”  

But how about finding that perfect bite of premium chocolate while shopping for bulk cases of soda, bottled water, or even more appropriately, cases of wine? Premium chocolate and wine are a great match, but can a club store capitalize on that?

“I don’t think club stores typically think of themselves as market developers, but they could be in confections, especially with the fast and furious product introductions right now,” says Jim Corcoran, vice president of trade relations for the National Confectioners Association.  “There’s such an opportunity for more chocolate and wine merchandising. The club stores are some of the biggest sellers of wine out there, they need to take advantage of that with ‘giftable’ and premium chocolates, right alongside wine displays.”

Traditionally, club stores have been known for their candy for resale and bulk offerings, particularly everyone’s seasonal stock-up favorite — Halloween candy. It is true that during fourth quarter, the channel is great at presenting gift and boxed chocolates and “entertainment” sweets, but it has not been a source of impulse candy the way so many alternative channels, even those that have nothing to do with consumables, are doing.

And therein lies the biggest confectionery opportunity for these biggest of big-box stores, according to Corcoran — impulse-driven, single-serve candy.

“It doesn’t necessarily fit with their merchandising philosophy, but if they were to have any sales at or near the front end, it would be a major upside where they could increase candy sales by 25 percent, our research shows,” he says.  

Warehouse style or not, candy offerings are terribly tempting to consumers waiting to check out. And these more upscale consumers are sure to bite, literally, if given some premium single-serve selections.