For its first four decades, BJ’s Wholesale Club kept its stores mostly along the East Coast, rather than pursuing the national ambitions of its rivals. But now, the Massachusetts-born discount chain is embarking on an aggressive expansion that could take it across the country.
The Westborough-based retailer’s goal is nothing short of spanning the entire United States, as it faces off against the larger Costco and Sam’s Club. BJ’s also wants to make its mark in the broader grocery business, in which high inflation offers a new opportunity for a company that promises lower food prices. BJ’s opened its 245th store in Palm Coast, Fla., on Friday, to be followed by 10 more openings through the end of its fiscal year in January. Another 10 to 12 are expected next fiscal year.
An expansion of this size is unusual for any brick-and-mortar retailer, given the high borrowing rates and construction costs — let alone for one whose typical store is roughly the size of two football fields. BJ’s has not opened this many stores in a year in more than two decades.
“We thought about, how do we get from where we are to the Mississippi River?’’ BJ’s chief executive Bob Eddy said on a recent stroll through the company’s store in Northborough. “And now we’re thinking about how we get beyond that.’’
BJ’s entered Tennessee and Alabama last year, and recently announced plans to open in Kentucky, its 21st state. Then there’s talk of Texas: The Dallas Morning News reported BJ’s is eyeing a location east of Dallas, the third one it’s considering in the state, a huge new market for the company and the farthest point so far in its westward march.
A BJ’s spokesman declined to comment on the report, other than to say, “Our real estate pipeline is the strongest it’s been in years.’’
The publicly-traded company boosted its store count by some 25 percent in the past decade, largely in the past four years. Its total annual revenue is around $20 billion, roughly 60 percent more than four years ago. Around 35,000 people now work for BJ’s, and the company has 25 locations in Massachusetts, where it was launched by former discount giant Zayre in 1984.
Store opening costs are expected to total $30 million during the current six-month period, almost twice the amount in the same time a year ago. Michael Baker, an analyst with investment bank D.A. Davidson, questioned BJ’s executives about this on an earnings call last month, though he remains optimistic about the company’s prospects.
Baker wrote in a recent research report that “there is no reason why this shouldn’t be a nationwide retailer one day.’’
A key ingredient: the company’s goal to become consumers’ supermarket of choice. A typical BJ’s store carries more than 7,000 different items, compared to around 4,000 at Costco. The basic membership at BJ’s costs less, at $55 a year versus Costco at $65. Baker said in an interview that BJ’s stocks more produce, more fresh food, and smaller pack sizes for nonperishable goods than Costco. Most supermarkets offer more variety than warehouse clubs, without the membership fees. However, BJ’s says its food items are 25 percent cheaper than the grocery chains, in part because of its house brands, Wellsley Farms and Berkley Jensen.
The ultimate aim, Baker said, is to draw customers away from the traditional supermarkets, not just the other wholesale clubs.
“BJ’s has tried to become your weekly shopping trip,’’ Baker said. “The realization for the company is that they can’t out-Costco Costco. They needed to figure out a way to differentiate. … BJ’s has always been good at produce and grocery [so] they’re trying to lean into that, the every-week shopping trip.’’
Retail consultant Burt Flickinger III with Strategic Resource Group said the company’s biggest challenges will be ensuring it has enough capital to continue its ambitious store opening plans — which are currently funded through cash flow, not debt — as well as beating Costco to the best real estate locations.
BJ’s has been doing well on both fronts, he said. With so many suburban and rural “food deserts’’ that lack good supermarkets across the country, Flickinger believes BJ’s has plenty of room to roam. He noted that BJ’s store designs are intended to expedite shopping visits — a key attribute for time-pressed consumers.
“The other competitors are forcing you to spend more time in the store, to buy more, while BJ’s wants you to spend less time in the store,’’ Flickinger said.
For Virginia shopper Charles Cheng, that prompted him to stick with BJ’s over the other big club chains. He estimates he buys two-thirds of his household groceries at the BJ’s in Chesapeake, Va.
“The BJ’s store is much better organized,’’ said Cheng, who works in sales for a tobacco company. “For me, it’s: ‘What’s my time worth?’’’
Fortuitous timing is certainly playing an important role in this expansion. Two internal projects at BJ’s came to fruition on the eve of the pandemic, when grocery sales boomed.
The first involved honing a strategy for entering new markets. BJ’s slowed new store growth to a crawl about a decade ago to reengineer its approach, Eddy said. The company took a close look at the demographics of its member base and used that to identify consumers most likely to become BJ’s members, along with how best to persuade those people to join, such as through discounted trial membership offers.
“The thing we weren’t doing [before] is really figuring out who to talk to,’’ said Eddy, a 17-year BJ’s veteran who was promoted to the top job in 2021.
Then there was the key decision to go digital. A decade ago, BJ’s had no online or mobile sales. Today, more than 10 percent of its revenue comes from digital sales; the purchases are gathered by employees and prepared for pickup at the store or sent to consumers via delivery services such as Instacart and DoorDash.
The company developed its app in time for the pandemic. “All of a sudden, it came at us in a tidal wave,’’ Eddy said. “We went from zero to $1 billion [in digital sales] in the first year.’’
The BJ’s app tracks how much money a customer is saving, versus standard grocery prices, either through in-store or digital sales — an important strategy to retain members.
When BJ’s member Meaghan Holmes looked at her app the other day, she found she saved more than $400 so far this year. She makes weekly grocery trips to BJ’s stores in Taunton or North Dartmouth.
“Obviously inflation has creeped up in the last couple of years since COVID, so it just seemed advantageous to start shopping a little bit more in bulk and a little bit more strategically,’’ said Holmes, a supply chain manager with Freight Farms in Boston.
The company also offers a credit card that gives 3 percent back on most store items and 10 cents per gallon off gasoline purchases at BJ’s pumps.
For retirees Joyce and August Westner of Winchester, gas is their biggest reason to visit the local BJ’s, in Stoneham. “It’s the cheapest station around,’’ said Joyce Westner, who still buys most groceries from Market Basket.
Frequent BJ’s shoppers are encouraged to upgrade to a Club+ membership tier, at a cost of $110 a year; those members get 2 percent back on most store purchases, and 5 cents a gallon off gas. A Club-plus credit card offers even more savings.
“We do a lot of work to tell members how much they saved,’’ Eddy, the CEO, said. “We’ve really come a long way from the old-school wholesale club we once were.’’
Jon Chesto can be reached at jon.chesto@globe.com. Follow him @jonchesto.