Costa Rica is the most significant market for PriceSmart and the company intends to continue growing.
The only country with the same number of national shopping clubs (7 with the recent opening in Santa Ana) is Colombia and the company does not rule out analyzing new expansion zones for the brand in Tico.
Luis Marín, vice president of Marketing and Memberships for Latin America and the Caribbean, talked about the success of the business model that currently achieves an average 87% retention of members annually.
He also talked about the added value that this offer offers to achieve its positioning in a niche well defined in the world before the competition of other formats.
Has it gone well with what they had been waiting for in Costa Rica since they started? How well and how important is the country’s contribution at the regional level?
Costa Rica is our largest market for the company globally. Costa Rica currently has seven clubs which is the same number of clubs that have, for example, Colombia, which is a much bigger country.
“Our operation in Costa Rica has much more time, and we continue to grow. This Santa Ana club is yet another example of PriceSmart still considering Costa Rica as a market with a lot of growth potential and that is why we continue to invest in the country. ”
Do you consider that the offer offered by PriceSmart according to the expectations of the firm has been well received in the country?
First of all, the concept of a membership shopping club has proven to be very successful around the world; is an industry of more than $ 300 billion.
“So the secret is to have a limited amount of the best quality items and have the best possible price.
“It is important to clarify that the best possible price does not mean the cheapest because in retail there is always the saying ‘we are the cheapest’. That’s a very complex issue because when you talk about price, you have to talk about quality and we prefer to talk about value, the best value, which is the combination of price and quality, and that’s what PriceSmart focuses on. ”
How does this format or business model work?
We have very low margins. That is the format we operate: low margins, few products, if we do not have 20 different types of mayonnaise or 20 sauces presentations, we have the one that sells the most and that makes us very efficient.
“We are low-cost operators, the facilities are simple, it is a winery; we receive the merchandise ready to be transferred from the container to the sales floor and that causes the costs to be kept low with a low margin and all those savings that have in the process are transferred to the partner. That is what makes us different from the other formats that exist in this market and others.
Obviously, in particular, in Costa Rica, there is no other membership club yet, but that does not mean that we do not have competition, we consider that there are very good retailers here who are doing very interesting things in their formats, but we believe that we have a nicely defined niche.
How much does PriceSmart intend to grow and invest in Costa Rica in the coming years?
I can not give you details, but I can tell you that we definitely do believe that there is more potential in the country.
“PriceSmart is constantly visiting new areas, new cities, and not only that, but we are also looking for new formats, with this new digital era as online shopping, and having an omnichannel strategy is something that we are very clear. Today we have a very well defined strategy and that makes us think about the future and how to give our partners a better shopping experience that is more convenient and efficient. ”
What is the highest added value of a membership and having partners unlike other types of retailers?
The business model is very simple, you pay a membership of $ 35 annually and membership allows you access to buy products in clubs. The difference is that the cost of these products, compared to other retailers, is cheaper, so when one does the math and compares what one saves by buying the same merchandise in PriceSmart versus other formats, at the end of the year one recovers much more than the $ 35 of the membership in the payments of the purchases.
“Our low margins serve to pay for the operation of the club; the utility of purchasing clubs is in membership income. That’s why membership is so important, that’s what makes all the difference: membership income forms the bulk of the firm’s profitability. ”
How many partners do you have in Costa Rica and how much does the annual percentage increase?
What I can tell you is the percentage of retention is very high and is above 87% per year as a company.
How do they determine what products they offer to buyers?
A shopping club has about 2,500 items, a hypermarket has at least 60,000. What we do is an 80-20, we buy the leading brand of the best product. We already bring the partner the selection of the product they need. Within that selection of articles, there are some that we have every day, the basic ones like grains and others, those can never be missing.
“Then we have the seasonal items, like the merchandise we already have for Christmas, which is being rotated.
“And we also have the products we call” the treasure hunt. ” Those innovative, exclusive products that our buyers go and search around the world and bring. The big thing is that if you come to PriceSmart, and it’s new and it’s new, and it was not the last time, it might not be the next time you come. It is an opportunity purchase and many partners already after having so many years in the market have already learned how it works. But there may be another new product. ”