Sol Price, Warehouse Store Pioneer, Dies at 93
It's hard to overestimate Price's impact on American retail. The warehouse store trend -- which inspired Home Depot (HD), Wal-Mart (WMT), Sam's Club, Best Buy (BBY) and numerous other low-overhead imitators -- got its start with this business lawyer-turned-retail magnate. In fact, rival Sam Walton openly admitted that he "borrowed" many of his ideas from Price's "Price Club" chain and Costco (COST) founder Jim Sinegal -- who later merged with Price Club -- got his start working at one of Price's "Fed Mart" Chain stores.
FedMart was Price's first entry into the retail sales business, and became a testing ground for many innovations that later found their way into Price Club. His first experiment was to focus on a highly-specific clientele: government employees. Offering only a few necessities -- liquor, drugstore items, home cleaning products, and premium gasoline -- the store kept prices down by minimizing marketing, overhead, and inventory and by charging shoppers a $2 yearly membership fee. By the early 1970's, FedMart had grown into a forty-store chain and Price decided to sell it to a German company.
The Start of a Shopping Revolution
Within a few years, however, Price was ready to get back into the retail game. In 1976, he opened the first Price Club store, which was initially focused on catering to small business owners. It was a truly no-frills shopping experience: Price Club didn't advertise, didn't accept credit cards, charged a membership fee and initially catered to small business owners. To keep costs down, Price combined his warehouses and stores under one roof, and built Price Clubs in low-rent areas that were slightly out-of-the-way. In fact, the first club opened in an actual airplane hangar that had once belonged to Howard Hughes.
In its first year, Price Club lost $750,000. Price decided to extend membership to the general public, a move that massively increased sales. It also prompted the expansion of the store's inventory, as customers increasingly began to rely on Price Club for most household purchases. In fact, by the late-1980's, the concrete-floored, non air-conditioned stores were selling everything from books to winter coats, and offering premium brands like Rolex and Dom Perignon.
The ultimate evolution of Price Club broke several of the founder's original rules, but there was no questioning its success: By 1993, when it merged with Costco, Price Club had expanded to 94 outlets in the U.S., Canada and Mexico. Annual revenues exceeded $6 billion. Not long after the merger with Costco, Price launched Price Enterprises, which became PriceSmart, a chain of membership-only warehouse stores in the Caribbean and Latin America.
In the end, putting a price tag on Price's efforts is almost impossible. In addition to launching the membership-based wholesale shopping trend -- which brings in more than $70 billion in the U.S. each year -- he also led the trend toward the low-service, low-price stores that have come to dominate America's retail landscape.