BJ's Wholesale Club Canvas Business Model

Executive Summary
BJ's Wholesale club is an East-coast membership based retailer that offers its members a wide variety of products at incredibly low prices.  BJ's is able to make revenue by selling merchandise at incredibly low prices in clubs, on its website, and at its gas stations.  The company operates 200 clubs along the east-cost from Maine all the way down to Florida, in addition to 3 distribution centers.  BJ's just recently redefined its target market as affluent couples, new moms, new homeowners, empty-nesters, and the growing Hispanic population.  I estimated the market segment of affluent couples, new moms, and new homeowners to be 9M, the empty-nesters to be 14.4M and the Hispanic population to be 10.4M.

My estimations were calculated as follows:

Affluent couples, New Moms, New Homeowners:

4M affluent Gen X living on their own
45M Gen Y
49M market segment - 50% (assuming only half fit in above criteria) x 36% (percent of US population living on the east-coast)=9M

Empty-nesters:

80M Baby-boomers - 50% (assuming about half of baby boomers are empty-nesters) x 36% (percent of US population living on the east-coast) = 14.4M

Hispanic Population:

52M Hispanics x 20% (assuming less than 36% of Hispanic population lives on the east-cost)=10.4M

I estimated that BJ's currently has 27% of the affluent couples, new moms, and new homeowners market, 25% of the empty-nester market, and 27% of the Hispanic Market, which equates to 8.8M members (BJs currently has 9M members).  The membership fee at BJ's is $50, creating a revenue of $442M a year.  The average basket size at BJ's is $150 and the average customer shops 6 times a year.  This creates a revenue stream of $8,000M.  I assumed the online average purchase to be $75 shopped an average of 4 times per year, creating a revenue stream of $2,600M.  Lastly I assumed members spent and average of $40 on gas every time they came to the club (6 times a year), creating a revenue stream of $2,100M.

Therefore, the total revenue stream is as follows:
Membership:          442M
In club sales:       8,000M
Online sales:       2,600M
Gas:                   2,100M
Total Revenue: 13,142M

The biggest costs for BJ's to operate are the cost of goods sold, the cost to operate 200 clubs and 3 distribution centers, and the cost of acquiring new members.  Of these costs the biggest is cost of goods sold, which is about 90% of Revenues, amounting to $11,800M.  This may seem high, but BJ's whole concept is selling a lot of product at very low margins.  I estimated the cost of running the clubs/distribution centers, and the cost of acquiring new customers to be $500M each.  This brings total costs to $12,800M.

Therefore, BJ's is left with a profit of $342M, leaving room to still make money with other expenses, interest payments, taxes added in.  I think BJ's business model is viable as long as they continue to grow members and don't increase expenses.  Because BJ's cost of goods sold is so high, they really need to be careful with what other expenses they incur.

Works Cited:
US Census Bureau
BJ's Annual Report 2011
bjs.com
Lifetime Brand's Global Trend Report
Inside knowledge from working at BJ's