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The Food Institute Blog

The Food Institute Blog

Membership Dues: A Great Business Model
Posted on April 09, 2015 by Brian Todd

How would you like to know that 2.2% of your annual revenue was going to come from fees people pay to just to buy your products or services? There might be some administrative costs incurred but other than that, you would have a positive cash flow before actually selling anything. Does this sound good to you?

Then you will want to open a membership warehouse club. Looking at a summary of statistics from Costco Wholesale by BMO Capital Markets, the chain will reap $2.6 billion in membership dues in the fiscal year ending Aug. 31, 2015 and $2.7 billion in fiscal 2016. That represents about 2.2% of its estimated annual revenues and if that $2.7 billion receives just a 3% return on its investment, it will grow by an additional $81 million in a year.

The industry has certainly evolved since Sol Price founded Price Club back in 1971. There have been other innovations in retail since then, including the rapid evolution of dollar stores, but none I can think of that has as positive a revenue stream as membership dues.

Are there any other game-changing innovative retail business models on the horizon that could prove so profitable?

Posted in Retail  

 

About the Author

Brian Todd
President/CEO
The Food Institute

Brian became president of The Food Institute in 2002 and has worked for this non-profit, founded in 1928, since 1980. Brian has been interviewed on consumer and food industry trends on a number of television programs, including Fox News, The Today Show, NBC News, the CBS Evening News and the PBS Nightly Business Report, and quoted in publications ranging from The Wall Street Journal and New York Times to Supermarket News, Progressive Grocer and Food Processing magazine. He has also been a frequent guest on various Public radio programs discussing food prices, mergers & acquisitions, and other industry issues.

Brian graduated from Ramapo College in Mahwah, NJ with a B.A. in Political Science and also holds a Masters in Administrative Science from Fairleigh Dickinson University.

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