HomeClub Drops Membership Plan : Retailing: The home-improvement chain is abolishing its two-tiered pricing structure in an effort to broaden its customer base.
HomeClub, the largest chain of home centers based on the West Coast, said Monday that it is abandoning its longstanding membership pricing policy in a bid to lure more customers.
While the company has always allowed anyone to shop at its stores, it has been known for a membership plan that provided a 5% discount. The program, however, led some consumers to mistakenly think that they could not shop at HomeClub without a membership.
“Membership was an impediment,” HomeClub President James F. Halpin said.
The company, which has 66 stores, this week will start refunding the balance of members’ dues via mail. Members paid $10 to $15 annually to gain the storewide discounts.
The company, a division of Waban Inc. in Natick, Mass., took an $8.8-million charge against earnings in the fourth quarter of 1990 to cover the costs of jettisoning the membership policy.
Halpin, who has enacted a series of changes since joining HomeClub last year, said testing in six markets confirmed that dropping the membership program brings in more customers. He said the tests showed that many consumers did not understand the membership plan, which helped the company readily identify its most loyal customers and target them for mailings.
With the demise of the two-tiered pricing system, Halpin said, all customers will receive the lower prices. The company plans a large television marketing campaign to inform potential buyers of the change.
Membership programs have worked for chains that sell food and other perishable, high-turnover goods, like Price Club. But it was less effective for HomeClub, where customers typically buy durable goods and return to the store less often to buy the same items.
Fullerton-based HomeClub has been locked in competition against the larger Home Depot and a host of others in the competitive home center industry. The rivalry drove one major Southern California chain, National Lumber & Supply Co., into bankruptcy last year.
Halpin said he has been repositioning HomeClub to appeal to a broader range of customers. While hanging onto its traditional base of contractors and hardened do-it-yourselfers, the chain has been trying to reach out to bring in more women.
HomeClub stores are stocking more upscale goods, grainy direct-mail ads have been replaced by slick newspaper supplements, and the kitchen cabinet display area in stores has been broadened, he said.
The company has spent $20 million on computers so that sales clerks can tell customers instantly how many items a store has in stock and when the next delivery is due. The chain has also changed its distribution system by adding several warehouses, allowing stores to receive more frequent deliveries and increasing their inventories.
Halpin said sections that did not seems to belong in a home center, such photo finishing, were replaced to make way for the new items. And so far, he said, the new strategy is paying off: The parent company’s operating income has increased during the past two quarters.
