BJ’s Wholesale Club represents a novel way of doing business for a large warehouse type store. Headquartered in Westborough, Massachusetts, and endowed with a large presence on the East Coast, BJ’s is a curious mix of a bare-bones warehouse outlet and the contents of a local grocery store fused to create a unique concept that has inspired a legion of devotees.
BJ’s Wholesale Club represents a novel way of doing business for a large warehouse type store. Headquartered in Westborough, Massachusetts, and endowed with a large presence on the East Coast, BJ’s is a curious mix of a bare-bones warehouse outlet and the contents of a local grocery store fused to create a unique concept that has inspired a legion of devotees.
From its humble beginnings in 1984, BJ’s has grown into an impressive retail force, operating 192 clubs in fifteen Eastern states. If the word “club” evokes images of a sort of paid exclusivity, that’s because it’s exactly what BJ’s does—it charges $50 for an annual membership, which essentially buys the consumer the privilege of walking through the door.
BJ’s Wholesale Club is different from other warehouse clubs. While all of them operate on a similar model and share similar features—the spartan concrete floors, minimal décor, and an abbreviated customer service staff—that’s where the similarities end. BJ’s is simply different because of its mission—BJ’s target customer is the individual family.
Because of the emphasis on families, you’ll find things at BJ’s that you simply won’t find at other warehouse-type stores, like supermarket-sized single products in multipacks that many families request, in addition to the massive bulk sizes popularized by wholesale chains. BJ’s also does things unheard of in this market sector, like accepting all manufacturers’ coupons and offering the option of payment with every major credit card, once again restating their commitment to the consumer.
BJ’s willingness to delve into the supermarket side of the product line while operating under the warehouse model translates to the largest selection of products in the warehouse store industry—over 7,000 items in an average store. Of course, BJ’s also has the obligatory selection of member services, such as optometry, travel, and wireless phone services.
Emphasizing its consumer-centric focus, BJ’s also goes out of its way to be an excellent community citizen. Cornel Catuna, BJ’s executive vice president of club operations, explains that BJ’s ideology is to go into a community, oftentimes one that other retailers have failed to penetrate, and personally meet with the key players in the community, from the mayor to the chiefs of fire and police, and forge a close bond and partnership. BJ’s real estate and construction professionals—those responsible for actually scouting and building the stores—are expected to embrace a community’s standards. It’s this “we’re your neighbors” philosophy that has allowed BJ’s to enter and even thrive in communities that have previously rejected other retailers.
Even more interesting is that BJ’s is a chain that has managed to not only provide excellent service, exemplary community relations, and a massive selection of products, it has also managed to achieve some of the lowest shrink numbers in the industry.
Loss Prevention at a Glance
BJ’s loss prevention efforts are headed by Charles Delgado, its vice president of asset protection. Delgado is the type of person eminently suited for a role as an LP executive. He combines the qualities and know-how of a good detective, yet has the sensibilities of a sales operation manager; a crucial combination unless you want to have every single product on lock down.
Delgado brings a wealth of investigations experience to BJ’s. He served in the United States Navy shortly after high school and then proceeded into a sixteen-year career with the Massachusetts Department of Corrections, where he was an expert in fugitive apprehensions and gang intelligence, developing a skill set that would eventually give him an uncanny insight into organized retail crime (ORC). After working a loss prevention stint at Target, he was asked by BJ’s to come aboard and form an investigations program to combat the new emergence of ORC. He remains there four-and-a-half years later.
Delgado most certainly has his work cut out for him at BJ’s. As he explains, “If BJ’s didn’t have an investigations model, the stores would potentially be a soft target. The clubs are an area of opportunity.” The massive size of the stores, between 85,000 and 120,000 square feet, coupled with the relatively small staff for a store of this size and the sheer number of products makes a combination that could potentially be disastrous. Says Delgado, “Due to our big-box environment, BJ’s has the square footage and size to maintain at least three times the inventory than that of a normal retail environment. Therefore, we are at a greater risk in terms of the impact and damage that an ORC group can inflict in a short period of time.” As a matter of fact, it’s precisely within this environment that BJ’s has been able to achieve shrink numbers that are among the lowest in its industry segment.
To understand why the stores could potentially be an LP nightmare, one needs to look no further than the business model. You start with a massive warehouse with concrete floors and metal shelving in keeping with the low-overhead, no-frills model. You then staff the store—one that contains as many products in a single location as four Walmart stores combined—with a bare-bones staff of the minimum number of people to get the job done. To top it off, you sell, among other things, extremely high-value products like televisions and electronics in a cash-and-carry format, and you can see why BJ’s is a loss prevention challenge. There isn’t a small army of sales associates wandering the floor, keeping an eye out for trouble; there are just a few. There aren’t 2,500 SKUs like your average store; there are over 7,000. And yet, Delgado and his team have posted some of the lowest shrink numbers in the industry.
According to Delgado, their loss prevention efforts begin with the hiring and training of the LP team. BJ’s boasts a formidable training program for its asset protection teams, and Delgado watches over the stores with an avid sense of pride and dedication. He’s leveraged his law enforcement background to augment the training and education of persons who previously didn’t know the process of preserving a crime scene and collecting evidence to combat the growing scourge of ORC. “Random groups of people can hit clubs from New Jersey to Florida in a matter of days,” says Delgado of the necessity of an investigations model required to fight ORC.
A Lean LP Model
The no-frills mentality doesn’t stop at the sales floor at BJ’s. It continues up into the management structure. BJ’s simply doesn’t have the luxury of a top-heavy LP department. According to Delgado, “The BJ’s asset protection team is a super-lean group of LP professionals who are armed with formidable educational, real-life and business experiences. Contrary to many LP departments that maintain large investigation teams, BJ’s lean AP team doesn’t have that luxury. Instead we diligently seek out opportunities to work smarter.”
Additionally, BJ’s takes this lean concept and gives it a novel twist with the addition of cross-training. Many of BJ’s loss prevention personnel have gone on to be promoted in other areas of the company and have taken that LP experience with them so that it pervades the everyday operation of the stores. Catuna explains that BJ’s asset protection department is actually part of its sales operations department, and that each AP manager in every store is actually part of the store’s management team. It’s this interesting approach that gives BJ’s an edge in loss prevention.
At BJ’s loss prevention professionals are not only homogenous with the sales staff, they sometimes even operate the stores. Catuna quips, “How many other stores can have their AP people run the sales floor? AP has become part of our DNA.”
LP is so woven into the management structure that Catuna estimates that 20 to 25 percent of mid-level managers at BJ’s have worked in an AP manager capacity at a BJ’s club at some point in their careers. Further to that, these former AP managers promote to other parts of the company in non-AP roles. The previous vice president of asset protection, for example, is now running the logistics division, and that person takes all of their AP experience and brings it to bear on their new duties. It’s an incredibly novel and effective way to do business and, quite simply, it works.
Catuna explains that this cross-training, this mixed LP-and-sales operations attitude was “part of our culture from the beginning,” and LP personnel, in contrast to other stores, aren’t looked upon as outsiders. He believes that no other retailer has done this as effectively as BJ’s or posted shrink numbers as low as theirs in any similar type of stores.
Catuna is zealous about his shrink numbers. “We wake up every day trying to fulfill our promise to our members. We can’t offer good prices if shrink is out of control.” According to Catuna, shrink at BJ’s has always been low due to their unique model, but not as low as it has been within the last two or three years, which is phenomenal considering the rapid emergence of ORC during this time.
Christine Neppl is BJ’s executive vice president of merchandising logistics, and previous to that, has served in BJ’s finance division for twenty-five years. She knows shrink—”We need less of it,” she states pragmatically, while at the same time noting that a certain amount of it in such a high-velocity, low-margin environment is a reality of doing business. She seems very pleased with the shrink numbers that BJ’s is posting, which is rare for someone in finance, which demonstrates how good the operation really is.
She voices the same sorts of issues as anyone in sales would, noting that typically, LP is viewed as the “sales prevention department” and that most LP managers want merchandise in lockup rather than on the sales floor, where sales managers want it. BJ’s has struck an excellent balance in this regard, with only the most expensive technology and small footprint items actually being secured. Says Delgado, “As an LP executive, I filter every decision I make to ensure that I maintain a focus on what is in the best interest of the clubs in driving sales, reducing shrink, and providing a safe, secure working and shopping experience.”
Additionally, according to Neppl, BJ’s has worked closely with manufacturers to ensure high-dollar value and high-theft items come protected from the factory, and BJ’s constantly maintains an accurate perpetual inventory of all high-value items.
Success Stories
BJ’s isn’t immune to thefts or ORC and has had its share of crime. BJ’s investigations team is aggressive, however, and won’t rest until the thieves are caught. When asked about one of his more successful cases, Delgado goes on to recount one of the most recent successes.
“One case in particular stands out,” explains Delgado. “BJ’s Club operators in the South Florida market were experiencing a high-level of electronics theft by an aggressive ORC group. The group would stage a vehicle in a fire lane and then push flat-bed carts loaded with various high-dollar electronics through the fire exit. This fluid group moved quickly from location to location, but through the diligence of our manager of special investigations, field AP teams, the club operators, and local law enforcement, the suspects’ vehicle was positively identified and a GPS tracking unit was placed on the vehicle. Once the device was installed, BJ’s AP team created a five- to seven-mile geo fence around all of the BJ’s locations in South Florida. Once the vehicle penetrated the geo fence, we informed law enforcement, and they were able to track the vehicle back to the ORC group’s safe house, which was heavily secured with perimeter cameras, alarms, and glass breaks. A SWAT team was utilized to breach the safe house, and a large amount of merchandise from multiple retailers was recovered by law enforcement, resulting in several arrests.”
BJ’s has also experienced high-tech crimes. A recent case came to light where a group of two men where travelling from Georgia to the Carolinas with a trailer in tow. Inside the trailer they had a series of sophisticated printing equipment and had managed to make exact copies of BJ’s sales receipts, which they would actually generate in the parking lot of the store they would hit. They’d simply walk inside, grab a piece of merchandise, and return it to the customer service center, phony receipt in hand, for a cash refund. It didn’t take Delgado’s team long to realize what was happening and immediately begin keeping an eye out for the suspects, who were caught and arrested shortly thereafter in Florida.
Technology Plus Face Time
Delgado’s in-store LP measures are up to the highest standards due to the nature of their business. Besides hiring the right people and training them formidably, BJ’s employs the best technology available from EAS systems to IP video. High-theft items like televisions, hard drives, and other high-value items are counted daily to ensure BJ’s knows where it stands at any given moment. Delgado is also quick to point out that BJ’s logistics process—a “best-in-class” system, as he puts it—ensures very tight controls using a cross-dock process where everything is tracked right from distribution centers.
Additionally, Delgado believes that in-store face time is critical. “Every single executive at BJ’s spends time in the clubs, and I’m certainly no exception,” he says. “All LP professionals must understand that we don’t have cash registers in our offices. It is vitally important that we spend time in the clubs and with our field teams to truly appreciate the hard work that goes into every sale. I visit clubs on a weekly basis, speaking to cart attendants, cashiers and managers, and members in an effort to educate myself in how they view the business and asset protection. I believe you have to make a solid effort to make yourself available to the front-line teams in the clubs, and at no point can you confuse effort with accomplishment.”
So where does BJ’s go from here? Onwards and upwards. From Neppl to Catuna to Delgado, the consensus is that there’s still room for improvement in the shrink number, and BJ’s won’t rest until their shrink is lower yet…and maybe not even then. In a business model where profit is sometimes measured in pennies per item, it’s simply impossible to not be aggressive about reducing shrink and preserving what little profit there is left.
It’s also easy to see why BJ’s is so successful with their loss prevention program. As Catuna states, “AP is sales ops, and sales ops is AP.” It’s this attitude, this culture of vigilance, where an AP manager might be charged with running the sales floor from time to time that pervades the organization, making sure everyone keeps loss prevention at the forefront. BJ’s sees no reason to deviate from this model, and for good reason—it works. And judging by their sales and shrink numbers, BJ’s will continue bringing value to the families it serves for years to come.