As a shopper, warehouse clubs might intimidate you due to their sheer size and selection. But as an investor, there are plenty of good reasons to consider investing not only in warehouse club stocks, but in the real estate operations that house those businesses. Here's why.
A definite pandemic winner
Warehouse clubs thrived during the pandemic for a number of reasons. First, as they were essential retailers, they weren't forced to shutter early on like so many nonessential businesses did.
Furthermore, their attractive price points and massive layouts made them a go-to for consumers who wanted to not only stretch their income at a time when the economy was in the dumps but also shop in a manner that promoted social distancing. Plus, buying in bulk allowed consumers to make fewer trips to the store, limiting their COVID-19 exposure.
Image source: Getty Images.
Now, warehouse clubs have a prime opportunity to play off of this success as the pandemic continues to linger and COVID-19 waves (and variants) persist. In fact, consumers who began shopping at warehouse clubs during the pandemic may expressly favor that option during periods of higher case numbers.
And that doesn't just apply to COVID-19. Warehouse clubs could see an uptick in business every year during flu season if consumers remain sensitive to health concerns. That alone makes them a viable business and a steady source of income for shopping centers. But there are several other reasons club warehouses continue to thrive.
An everyday solution to supply chain woes
It's not a secret that supply chain holdups have caused an inventory crunch that's left consumers scrambling to get their hands on many of the staple items they rely on. And while some of those backlogs have eased since late 2021, they're still a problem.
Warehouse clubs help solve for this by allowing consumers to load up on the items they need in bulk. As such, there's a good chance warehouse club memberships will increase in the near term as consumers continue to recognize the importance of stocking their homes with essentials.
Relief from inflation
Inflation has been rampant for months, so now more so than ever, it's important for consumers to eke out savings in the course of buying essentials. Warehouse clubs are known for their competitive price point, and that alone is enough to make them a mainstay not just in the near term but even once living costs creep back down.
Not a lot of competition
Though warehouse clubs naturally compete with each other as well as supermarkets and big-box stores, they also tend to be fairly spread out. That alone lowers the risk of store closures due to an excessive amount of competition.
Stable anchor tenants
Like malls, shopping centers frequently rely on anchor tenants to draw in customers and smaller tenants alike. And just as department stores commonly serve that purpose for malls, so too do warehouse clubs fulfill that need for shopping centers.
A solid investment
If you're interested in investing in real estate, it pays to look at properties that house warehouse clubs. While it's true that many people may have joined a warehouse club just to get through the pandemic, the reality is that these stores lend to a certain degree of addiction. Once you've gotten used to buying your favorite household items in bulk at a discount, it's hard to give that up. And so there's a good chance warehouse club membership rates will hold strong and steady for many years to come, making these properties a very solid bet from a real estate standpoint.
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