Business: membership business model

Self-tutoring about business models: the tutor mentions an interesting one.

With a colleague, I was talking about the grocery business recently. They mentioned a wholesale operation whose business model is that their profit is the membership fees; theoretically, they break even on everything else. I wondered about the feasibility of that model, but it seems likely enough to be true, as follows:

Let’s imagine a membership fee costs a hundred dollars per year. (Last I looked, it doesn’t; the place I’m thinking has memberships either cheaper or more expensive than that. However, we’ll imagine one hundred dollars, for easy figures.)

The grocery business, typically, runs one to three percent profit. Imagining two percent, A person buying a membership for one hundred dollars, then buying five thousand worth of groceries that year, emulates the business model. Moreover, that seems to reflect the reality I’m aware of.

Source:

itretail.com