Internet Wholesale Club Takes Aim at Costco Online

In an effort to challenge Costco Online’s stranglehold on the Internet wholesale club market share, New York-based HouseHold has launched an online store with an aggressive discount pricing plan.

HouseHold Direct’s new wholesale buying site includes products and services from nearly 1,000 manufacturers and distributors, and helps customers browse the selection with comparison shopping tools and a shopping advisor. The company says the site uses technology to “track, profile and understand members’ shopping habits to personalize its site for that member.”

In addition to brand name products from Aiwa, Bassett Furniture, Hamilton Beach, Mikasa, Pioneer, Sony and others, HouseHold offers long distance telephone service, medical services, travel arrangements, entertainment information and tickets, mortgage lending services and auto financing.

Battling the Giants

Costco, which launched its Web site in November 1997, also owns the Price Club wholesale stores and draws its online inventory from both chains. The company has 13.5 million members and operates 320 stores in the United States and six other countries.

The company is in the process of developing a separate online shopping site under the Price Club brand, while Wal-Mart’s wholesale club chain, Sam’s Club, is also building an online store.

Unlike Costco, Price Club and Sam’s Club, HouseHold Direct is taking a reverse approach to building its business. The company launched its online store this week, while it is still in the process of completing the purchase of nine brick-and-mortar wholesale club stores. Those stores, which are all independent wholesale clubs that are not affiliated with any major chains, will eventually work with the online store to cross-promote each other, the company says.

Bullish Perspective

Like its competitors, HouseHold charges a membership fee, but unlike the yearly fees of the others, HouseHold Direct charges a $49.95 (US$) start-up fee and $9.95 per month. The company offers 2,500 frequent flier miles, good on any airline, as a bonus for new members when they sign up and remain members for at least two years.

The company has about 2.5 million members and expects to add 270,000 more through pending acquisitions of other buying clubs. HouseHold Direct is also taking to Internet service providers about co-op marketing agreements that will further drive its membership base.

The company has said that it expects to capture five percent of the online consumer market by the end of 2001 and 15 percent by 2004.

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