Members-only shopping club promises bargains
● A new online shopping business that will bring branded goods to SA at cheaper prices plans to disrupt the local retail market with a model based on membership.
Using a business model similar to that of Costco, the US chain based on a membership-only warehouse club, Allsale Club is a members-only online shopping business.
It will start by importing up to half-a-million products, from batteries and razors to cleaning products, apparel, fragrances, cosmetics and watches, sourced directly from global suppliers.
Membership requires a monthly fee starting at R79, with no contracts, lock-in periods or cancellation fees, and it is this fee, and not margins on the goods sold, that underpins the business model.
“As our membership base grows, the better our purchasing power to seek out great offers and exclusive buys for members becomes,” says co-founder and CEO Michelle Lehrer.
Lehrer and co-founder Justin Drennan have funded the venture so far but will be looking for external funding as it grows.
Shopping categories include health and beauty, baby and toddler, toys, fashion, homeware and consumables. The site handles all import-related charges, including duties, offers free returns and delivers direct to a buyer’s home or work.
Membership models are successful overseas, notably in the US, where people pay a subscription because they believe they can recoup it by getting cheaper products.
“In apparel alone, we offer 500 international brands currently not available in SA and more than 250 in the cosmetics and hair categories,” says Lehrer.
Though other items may already be available locally, members will benefit from lower prices without having to wait for promotions, she says.
“We are sourcing from wholesale suppliers around the world. Our website is a source of products, like a marketplace linked to a wholesaler, bringing those to consumers at wholesale margins.”
Allsale is not the authorised distributor or licence holder for the products “but what we’re excited about is it’s the purest form of competition. We believe we’ve found a way to bring global, market-related prices to SA.”
Lehrer says the more members Allsale has, the lower margins can go. “I think most people will get that membership fee back in one transaction through the savings.”
For distribution, Allsale uses Parcelninja, which was founded by Drennan.
“We believe we are launching at a great time for consumers, as value businesses thrive in a recessionary environment,” says Lehrer. “We are everyday value and everyday great prices. We won’t bombard members with promotions, we want to build trust that our best prices are always what members pay.”
Among the products on sale are Pampers wipes at R15.99 a pack, compared with the recommended retail selling price of R29.99, and Twinings tea for R39.99 instead of R99.99.
Purchases of more than R800 come with free delivery.
Allsale, which will be taking on other retailers that have built up substantial online shopping businesses, is undercutting competitors. A 100ml bottle of Dolce & Gabbana Intense eau de parfum spray, for example, is priced at R1,489 on Allsale and R1,750 on Takealot (with new packaging).
Hugo Boss Man eau de toilette is R949 for a 125ml bottle on Takealot but R1,049 for a 200ml bottle on Allsale.
Besides Costco, other members-only clubs in the US include Sam’s Club and BJ’s Wholesale Club.
Costco — which boasts 94-million members — charges them an annual fee to shop at its stores, and these fees are the bulk of its operating profit.