BJ's Wholesale Club Holdings, Inc. (BJ) Earnings Call Transcript & Summary

Good afternoon, everyone. I'm Mark Carden, an analyst on the hardlines, broadlines and food retail team at UBS. We are extremely excited to have BJ's Wholesale Club with us today. For anyone that's new to the story, BJ's operates over 200 warehouse clubs along the Eastern Seaboard and into the Midwest. It's seen a tremendous surge in membership over the past year and generated over $15 billion in revenue in 2020. With us today is Bob Eddy, Executive Vice President, Chief Financial and Administrative Officer at BJ's. Bob originally joined BJ's in 2007 and has held the CFO seat since 2011. And with that, Bob, thanks very much for joining us today.

Thanks for hosting, Mark. Glad to do it.

Absolutely. I guess starting off, COVID has had obviously a really big impact across retail. And BJ's saw a significant increase in both membership and sales growth over the course of the past year. What actions did you take that you think were most impactful and helping you prepare for and deliver for your customers during the pandemic? So really almost just kind of infrastructure that you guys have been laying over the few years leading up to this past year. And then also, what were the biggest pain points that you saw along the way this past year? And how did you address them?

Yes, that's an interesting question. So our story over the last few years has been a good one. And I like the premise of your question because some of the investments that we've made over the past few years have -- it really helped us get through what has been the most challenging and crazy transformational year and, I think, in the company's history. When I think about all of the transformation that we've undergone this past year, I think about membership, I think about our digital business, I think about our balance sheet, our real estate portfolio, just a bunch of different avenues of change that our team has been wonderful in supporting throughout the entire year. Taking them one by one, a couple of years ago, we made a conscious effort to rethink about how we were attracting members. And for the predominance of my tenure with the company, we were attracting members using a free trial method, where we would offer you a free trial for 90 days, and then try and convert you to a paid membership model at some point during or after your trial. A couple of years ago, we moved more towards a discounted model. Meaning we're getting everybody in as a paid member, and that presents a couple of different challenges. It's slightly less traffic versus a free offer, but the quality of the members that come in and sign up tends to be much better. They shop more. They renew at higher rates. They engage with our digital properties. And so setting that groundwork a couple of years ago was pretty important to us this year, as we're able to really build on that foundation, as we've gotten an enormous influx of new memberships during the pandemic. And parts of that foundation include moving people up to primary tiers into premium tiers, like our rewards membership, or having a BJ's Mastercard, or being part of our Easy Renewal program. Having that track laid beforehand has given us really a leg up as we worked through this past year and now enter this critical period of trying to renew these folks that joined us as part of what everyone calls the COVID cohort. Our digital business just a few years ago was very much a nascent business. It was $140-million-odd when we went public. It's 5x bigger today and growing quickly based on all of the work we've done over the past few years. You rewind the videotape 4 or 5 years, and we didn't really have a website that could get out of its own way. We didn't have an app that solved anybody's problems. We really just didn't have anything from which to work. And we spent a few years building all that infrastructure. And this past year that we just finished was about hanging a business off of that infrastructure. That was our plan for the year. And lo and behold, all you need is a pandemic, and you get a thriving business on top of it. Our challenge now is to continue to build on top of that success. We've launched all sorts of new capabilities like buy online, pick up in club for fresh goods and curbside pickup. And our members are really responding to these things. Our balance sheet is almost totally remade from where it was just a year ago and certainly from when we were private, with now only 1x leverage on the business versus 3x a year ago and 6.5x at our high point when we were private. It really provides a lot of flexibility for us as we go forward. And that becomes important as we think about our ability to grow our chain and increase our unit count. Something that's again been many years in the making as we tried to figure out how to crack the code on opening clubs successfully, and getting the right number of members to operate efficiently and to operate profitably. We had several years in a row only opening one new store per year, just trying to figure out what the right recipe was. And this past year, we got 4 open, all successful clubs, all doing well. This new year we're planning on 6. Next year we're looking towards 10. And hopefully it's off to the races after that. So it really has been quite a year of so much change, so much demand for everyone's time and resources. And all of it in the middle of a pandemic when we spent all of our time trying to keep our teams safe, our members safe, and provide all the food that we could provide to those communities that we serve during this really crazy year. It's been quite something.

It has. One of the questions we get pretty frequently is when you think about your gains over the past year, obviously some of it was wallet share shifts with services being shut down across the country. You also had market share gains. And in the third quarter, you guys pointed to a little bit of over half of your gains coming from market share as opposed to wallet share. Is that a fair proxy for the entire previous year, would you say? Is there a different way that we should look at it? How would you frame that?

I think it's fair to think about the growth coming from both of those avenues. So as we look at the data, we believe we gained share in every market in which we operate, against nearly every competitor that we operate against, in every category almost that we sell things in. And that's just a result of what's going on in the world and our ability to service those needs, right? We've become an incredibly relevant form of retail when people need to buy in bulk at a value. We're a good place to consolidate trips because we sell almost everything, almost every category out there. And adding the digital conveniences on top of all that, particularly fresh goods for BOPC and curbside, really is sort of the icing on the cake. So we look at it and say we certainly gained share. So our slice of the pie got bigger. The overall pie got bigger as well, right, as people worked from home and didn't need lunch in the office and didn't go to restaurants any longer. I know I've eaten PB&J pretty much for a year straight, so my wallet share of PB&J has gone sky high. And so it's a really heavy thing to think we won on both of those axes during the year. And at the same time, it's a little bit difficult to predict what happens from here. I think it strikes us as probable that we will retain our slice of the pie, at least a meaningful chunk of it, as people don't often want to pay more for things that they've got used to paying less for. It's incredibly difficult to predict what happens with the size of the overall pie, right? As the world hopefully returns back towards normal as the pandemic fades, I would expect member behavior to change a little bit, right? They're going to go back to the office. They're going to go to restaurants again. And I would imagine that lessens the need to buy so much food at home, but it's just so difficult to predict when that might be and how fast and how deep any pressure may get. We feel great when we see -- we look at our member data and see their trips and their spend, their basket size, their lifetime value increasing, their participation in our digital properties. All of that makes us feel great about our ability to retain as big of a piece of the pie as possible.

Makes sense. And then on the membership front, you guys have obviously seen a sizable uptick recently in your renewal rates and your premium penetrations. Are you expecting to see much of a reversion in these rates post-COVID? What tools have you guys found to be most effective for really driving incremental sign-ups, renewals and premium conversions? And then just in terms of some of the strides that you guys have made in membership analytics, how can you use these to help bump up your chances of really keeping some of these new members in your ecosystem?

Yes, membership is a very exciting area of our company, right? We've got the biggest cohort of new members we've -- I think we've ever seen, certainly the biggest I've ever seen in my long tenure with the company. And that's an exciting thing. It's a thing that comes with a bit of a burden too, because we want to make sure that we take advantage of the opportunity that we've been given to please these members and then renew them. The data that we can see makes us feel really good about our prospects for doing so. If we look at this cohort against previous first year cohorts, they are coming to see us much more often, on the average 5 trips more, than previous first year cohorts. We talked about on our last earnings call, their baskets are 19% bigger than previous year cohorts. They're engaging meaningfully with our digital properties 6x better than the previous year cohorts there. Demographically, they look good, right? They make plenty of money. They're educated. They have families. They look -- they're a little bit younger. They look like great members performing very, very well. And so that gives us a ton of confidence that we have a good shot of retaining them. If there's a doubt to be had, it's because we've never seen what happens on the other side of a pandemic before. If this was any other year, we would look at this cohort and say these guys are amazing, we're going to renew off the charts. And we're tempering that optimism with the fact that I'm sure people's behavior will change to one degree or another. Again, tough to forecast when and by how much, but I think almost everybody's will, to some degree. And that gives us a little bit of pause. Situationally, when we look at it as well, the biggest chunk of that new member cohort came in in the March, April, May time frame. So we're literally just starting to try and renew these folks in the past few days. Too early to call the ball on any of that, but they are renewing into a still evident pandemic. And so their life hasn't changed all that much now that we're asking the question. So that should bode well for the answer on renewal. And if the government approves stimulus, and they look ready to do that, that should also help -- should help renewal. As every stimulus we've seen so far, we've seen a little bit of a bump in our business, and I would expect this to be no different. So cautious optimism is how we're thinking about our prospects for renewing these folks. The largest story on membership is a good one, and I talked about bits of it earlier. But if you think about the quality of the membership, not only is it a bigger size of membership, but the quality of membership is meaningfully different from what it was last year and a couple of years ago on almost every metric that we look at and care about. You look at renewal rates. Our 10-year renewal rate is at an all-time high at 88%. If you look at first year renewal rates, that used to be in the 50% neighborhood. We've gotten that over to -- over the 60% mark, and hopefully we can continue to improve that. If you look at premium tier participation, that penetration is up to 31%. And that one really surprised us as we went through the pandemic, given how many new members were coming into the system. We didn't think we had a prayer of increasing the penetration, and we increased it quite nicely. And Easy Renewal goes along with it. Now 70% of the membership is enrolled in that program, again helping to renew folks on time and in a better fashion from an experience perspective. So lots of great news there. As we go forward, I think we'll continue to build on those same things, right? We will actively try and get folks up into the premium tiers. We are tethering all membership discounts that we make to first year members, to Easy Renewal in the second year. So you have to renew at full freight if you take a discount. That should continue to drive that metric forward. And renewal rates obviously, I think, should continue forward over time too. We're getting up towards a 9 handle, and that's where our biggest competitor is. So certainly proud of over the last few years, I think we started with this management team at around 83%. And so we've got a nice improvement to 88. Still some headroom to catch our competitors, but we'll work on that as we go as well.

That's great. It sounds like a lot of momentum. Pivoting back to new clubs, you touched on this earlier, just you guys are looking to increase your pace of expansion. And then also on your latest earnings call, you guys mentioned that you believe you've really cracked the code when entering into new markets. What do you believe has been most impactful on this front? And we've had a question come in from the audience on whether you believe you could ultimately become a nationwide retailer. And expanding on that a bit more, would you always want to expand to contiguous states first? Or would it be feasible to establish a presence in the West Coast sooner than it might take to expand across the country?

Sure. So this has been a long-term effort to really figure out how to crack that code. It starts back in 2015 when our class of clubs in that year were not particularly successful. They were not particularly successful for a pretty simple reason, which is we didn't open the doors with enough members. And interestingly if you ask the membership team at that point, they would have told you they hit their membership goals on opening day. And when we unpack that statement a little bit, they were shooting at 5,000 members to have on opening day. And you need 15,000 to break even. So they're shooting at the wrong target. So first and foremost, we got everybody aligned as to what the economic model was and what we were actually trying to accomplish. We took a club in Kearny, New Jersey as a new club test. And we assembled a team of folks that have never really been involved in our new club opening process, and told them they had a blank check, and they could do whatever they wanted to try and make this a success. They did a few things. One is they spent more in opening the club. Sounds easy. And in fact it wasn't all that complex, right? We used to spend about $1 million in preopening costs per club. That was primarily rent and some payroll to get the club ready. Now we spend $2 million, $2.5 million on average, something like that, depending on the market. And it includes a much higher percentage of preopening advertising, storytelling, membership drives and really is just trying to get out in front of the opening. The "if we build it, they will come" model wasn't really resonating. Second, as part of that increase in spend, they started to spend on different things. Our premium -- sorry, our primary method of acquiring members years ago was direct mail. It's cheap. It works. Doesn't necessarily acquire the perfect number, particularly as people age, but it got enough done for the cost. But the team decided to push further into digital acquisition means, social media, television ads, a bunch of different other medium. And that has proven to be pretty successful. We're talking to members in different ways, in ways that resonate with them, not just through their mailbox. And we've been able to really figure out ways to really ramp up the throughput through the funnel prior to the club opening and after the club opening. And then finally they've done some great things in teaching new members how to use the club. And that takes the form of tweaking the promotions that we would do around the opening of a club. So we know a few things about our business. One, the #1 predictor of renewal rates in a club is frequency of shop. The #1 predictor of frequency is breadth of shop. And so the team took those 2 simple thoughts and tried to design around them, trying to get weekly shop frequency, and trying to teach people about all the different things we offer, and incent people to get into multiple categories. So they would design coupon books that would have instead of 25 coupons good whatever you want or good all at the same time, they would have 5 good each for 5 weeks, right? So they're trying to get you into that weekly habit. And they would make sure that in each of the week's coupons, they were moving you around the building. So you're getting into key categories that are meaningful for your lifetime value as a member for your renewal rate, and frankly for your value. So getting people into key general merchandise categories like electronics, getting people into bakery or produce or meat, things that really matter to people, things that showcase our value, things that really are good predictors of renewal rate. So long story short, we spent a lot more money and did a bunch of different things, and managed to prove that very well in new and existing markets over the next few years. And then we started building the pipeline. It's a bit of a long tail. It takes a couple of years between site identification and when doors open. And that's why you see the buildup that you've seen, right? We got, after I think 3 years of only one club apiece, last fiscal year 4 successful clubs opened. This new year that we're in, we're predicting 6; 10 for the following year and hopefully beyond. I do think that you'll see us do a mix of new markets and existing markets. I do think we will, for the near term, use a contiguous approach. So this year's new market will be Pittsburgh. You'll see us, after that, hit contiguous markets to that, so Ohio, Indianapolis, Nashville, so kind of do that march across. We can handle basically everything out to the Mississippi through our current distribution network, and that guides our thinking about doing a contiguous path. If we were to hopscotch to Texas or Denver or California, it comes with a big burden from a logistics perspective. And so while those markets are exciting to us, and we think we'll get there someday, I think for the next few years we'll pursue a more ratable approach that doesn't come along with the humongous logistics expense to figure out.

Sure, and that makes sense. Just thinking about the east of the Mississippi focus, if you guys after -- are successful of course in opening 6 stores and then 10 stores; and then as you mentioned, potentially off to the races, do you guys have the capacity to go significantly above 10 new stores a year without adding distribution capacity? Or how would you think about that?

Yes, I think we're clearly fine until we get above 250 clubs. After that, we can do some things inside the network to create more headroom without adding distribution centers. If we go much above that, we would probably need to start investing in our distribution network. And so we'll keep an eye on it. I think the farther we get to the west, the more we'll start thinking about it for obvious reasons. You do need a bit of a critical mass to run a distribution center that would be sized appropriately for growth. And so there may be an interim step where you use third-party distribution in a certain market, while you build up the critical mass in clubs or something like that. But for the near term, we've got plenty of capacity in the network.

Great. And then turning over to margins a bit, you guys obviously have seen enhanced profitability. Has your thought process changed at all on price investments? Does it make sense to get more aggressive here to widen your gaps with the competition?

Yes, it's been an interesting year from that perspective. The gaps have widened on their own and when we've invested. So being the low-price player is a cornerstone of the club business, not just for us but for our competitors as well. Our pricing model is essentially to match our club competitors every day in every market in which we compete. And that generally yields 10% to 15% lower prices than our competitors in the mass channel and 25% to 30% lower than grocers. So the model tends to work. I do think we view that as a sacrosanct. We want to make sure we have the right pricing every day, and we will do just about anything to do it. So the second quarter of last year is a great example of the price of beef went absolutely crazy for a period of time, and we didn't really change our price much at all. We always lag in inflationary environments because we want members to really feel like they're getting a value. And you can see it in inflationary environments, right? The grocery channel particularly tends to move quite quickly on prices as they increase, and our channel does not. And part of that is the model difference in terms of the sort of the P&L differences and the profitability differences. Part of it is we have a lot more capability of holding extra inventory too. So in an increasing price environment, if vendor X calls and says their prices are going up 10% next week, we'll place orders today for everything we can fit in the steel racking in our clubs, and keep the prices as low as we can for as long as we can. Because we know it's so critical to the member's perception of our value and how critical that perception is to their renewal of their membership. So no real change in our methodology there, that's been our practice for a while. I think it will continue to be our practice for the foreseeable future. I don't know why it would change. I do think there's opportunity to grow margins independent of what we might do with pricing. And that, I think about 3 avenues to do that: one, the continuing evolution of our category profitability improvement initiative, which has been incredibly transformational. Since we started that program about 5 years ago, our rates are up over 300 basis points. And it really started with injecting data into our negotiations with our suppliers. So understanding what was going on with the input costs and other drivers of the costs, and comparing and contrasting with what we could find out about competitor costs and what was going on with the pricing we were being offered. So just being a little bit smarter and a little bit harder nosed about how we negotiate it. Having gone through the portfolio of goods several times at this point, there are less of those traditional wins and more assortment-based wins. So trading out older, lower-growth, lower-margin categories for new, higher-growth, higher-margin categories. So think about skinnying down a category like canned vegetables and using the white space to put in better-for-you snacks. Pre-pandemic anyway, canned vegetables was a pretty steady flat business, so not a lot of growth there. It's not very margin-intensive. But better-for-you snacks hits the bull's eye in both of those markets. It grows like crazy, and it's much more margin-dense than canned vegs. So we continue to have opportunity to make moves like that. We've made a bunch of them this past year, and we'll make more as we go. And that should allow us to mix margin north. Private label is another one where we've been moving that needle north as well over time, but in a pretty ratable fashion. We've been more or less increasing about 100 basis points of penetration per year. So we're at 21% today. And we look around and we see our competitors in the high 20s to high 30s, some of them, and think we have some more opportunity to do that. The pandemic provided a great opportunity, through nothing we did, to really allow trial in our private label. So if you were coming into our store and there were no Bounty paper towels, you were going to buy the Berkley Jensen product. We saw great uptake on that. We've seen great repeat purchase rates. And so that, combined with where our competitors are, has really given us the courage to try and step on the gas a bit on private label. Private label, no surprise, has higher margins than branded goods. And so we should mix upward from that as well. And finally as we build out our services business, so think about optical and travel and home improvement and cellphones and things like that, those are pretty margin-dense businesses as well. And even though our primary goal there is not to make a ton of profit on them, but rather to build on the value proposition of the overall membership, it should be a pretty big source of growth on the top line and from a margin rate perspective as we go forward. So some nice opportunity to build on margin rate from here.

Sure sounds like it. On the services front, your largest competitor has quite a big business in those categories. Is there anything that would structurally prevent you guys from reaching a similar penetration? Are there any categories you guys wouldn't want to compete in?

I don't think there's anything structural from a penetration perspective. They have an enormous business, and they run it very, very, very well. They've chosen a long time ago to run many of those businesses themselves and run them in a way that the growth means something to them. Our choice long, long, long ago was to really offer these things in the easiest way for us to manage as possible. And that, in most cases, meant to outsource it to a third party and basically collect a fee. So we weren't really invested in the growth. If the supplier wasn't invested in the growth either, the business really didn't grow. So a couple of years ago when we decided to really pull this lever, we started to take businesses in-house and really looked at other new businesses. First one we took in-house was our optical business. That was one of those businesses where we were just collecting a rent check effectively. And now running it ourselves, we're invested to grow it. It's growing nicely. The pandemic provides a little bit of a blip in the growth as that had to be closed down. But now that it's back open again, it's chugging its way back to pre-pandemic levels. New offerings like cellphones and appliances with alliances with AT&T and Whirlpool respectively are really about giving members access to tremendous value. So the AT&T deal is $250 off the best deal in market anywhere in market every single day. That's amazing value. And it's something that makes an impression on a member if they understand it, right? They match that $250 savings up against their $55 membership fee and think this place is amazing. And so while we don't need to make a ton of money off that sale, we can try and engage people more and incent them to renew by using the services platform. So we'll look to build and grow these businesses and add more. So we just announced the partnership with Citizens Bank in the last few weeks to do a buy now, pay later program. That's probably the first of many financial services. If you look at our competitors, they're into tax prep and check cashing and preferential interest rates on savings accounts and all sorts of different financial platforms that we've never even dipped our toe in. And so there's plenty of stuff to go do here. It is really a longer-term build. It should be the source of growth for quite a bit of time, to get to where our competitors are from a penetration perspective.

Great. And then on the operating expense side, on your 4Q call you guys noted that you have some flexibility on staffing levels, depending on what sales levels you ultimately are seeing. More broadly, how are you thinking about potential wage increases? Particularly after your largest competitor just brought up its own wages by $1.

Yes. This is something that we've been paying attention to for a while and investing in for a while, in most cases ahead of minimum wage requirements to do so. So we don't look at it on a chain basis. We look at it on a market-by-market basis. Our belief is that what makes sense in Boston may not make sense in North Carolina and vice versa. So we tend to look at it on a market-by-market basis, understand where our competitors are starting their folks, what's going on in our clubs from a turnover perspective, all the things that you might think about as you try and make this decision. And then we try and season it with a little bit of the knowledge that our team is the one running our business day to day and interacting with our members day to day. So getting out in front of mandated wage increases has been important to us for a while. I don't think that will be different. I think we'll continue to do it that way. And as we sit here and stare at the business, this year we'll have some wage investment in it, about $25 million-ish. And that's about the same level of investment that we saw last year. And I would imagine that we'll have more investment in the future as wages go north, as the penetration of digital sales increases hours in the clubs, and as our commitment to our team members causes us to invest again further. It's up to us to figure out how that works in the economic model of the club, of course, right? So we understand that. We figured out ways to be as efficient as possible to somewhat offset the burden of increasing wages in the past. We'll have to continue to do that to be as efficient as possible in the future. But we want to make sure we have the right team members, the best team members, a great experience for them and for our members. And wages are a key component of that.

Makes sense. And then one of the areas in merchandising that you guys have been doing a lot of work on is really just improving your general merchandise assortment, expansion in categories like sporting goods. Just overall, what inning would you say you guys are in right now with respect to your general merchandise transformation? And what kinds of actions do you think you can take from here?

Yes, I would say we're in the middle innings. The early innings of the game were really large resets of categories. For those that have been around our story for a while, taking out jewelry and putting in more apparel, that was really the early inning ballgame. Getting rid of categories that just flat out didn't work for our company, like jewelry; and getting more into categories that did. The move towards apparel has been a great success for us. It is a relevant category for folks. We can provide outstanding value against other apparel retailers by virtue of how we merchandise and how we buy. And we're seeing much better access to goods and brand names as we go as well. The pandemic was an interesting year from a GM perspective, not just with apparel, which stopped dead in Q1 and then started back up again, but as people started to experience the other parts of our general merchandise assortments, investing in their homes, buying televisions, buying furniture, buying patio sets or outdoor heaters or things to ease the burden of being home every day. And I think they liked what they saw. And that really gave us the ideas on what are the next sets of categories we should offer. A couple of them come to mind. First and foremost is exercise equipment, very much on trend right now. And it hasn't been a category that's been in the club since I first started with the company. And even then, it was not -- it was not very -- it was not driven by quality. It was low-price-point, opening-price-point goods that were just meant to sort of plug a hole in the assortment, not necessarily tell a story and provide a quality experience. So if you look at our assortment right now, you have, instead of $100 exercise bike, you have a $600 or $700 exercise bike. You have a couple of other options in there as well, trying to put together a meaningful quality assortment where people can trust that what they're buying from us is good and that is visible value against the market. The next one is an important technology category, which is connected home. As we go forward through this year, you'll see a much more cohesive presentation of connected home. When we've offered these types of electronics in the past, it's been more on a one-off basis where you'd have an in-and-out product on a Nest camera or something like that. Now we're going to really bring in a bunch of different products from all of the relevant brands, whether it's Nest or Amazon or Apple or others, and have a clear and cohesive and full assortment of these items because our members are frankly asking for them. And so it will be great to see that come in. I'm a big fan of technology, so I buy every new gadget on the block. So I'll have a place to go do that at a bargain now.

That's awesome. And then speaking of technology, a little bit different angle on it. But just omnichannel, have you guys noticed many major differences in order composition between your delivery shoppers and your BOPIS curbside shoppers? Are you finding basket sizes and mixes to be similar? How do the economics compare? And does the pull forward in online penetration have any major effects on how you really think about store placement and expansion going forward?

Yes, it's been quite a growth ramp on these businesses. We've had same-day delivery for a few years now that's executed through partnership with Instacart. We've had what I'd call regular BOPC for a couple of years, meaning non-fresh. That was largely used as a general merchandise reservation system. So if you wanted your Nest camera, continuing the last discussion, and you wanted to make sure it was still there when you got to the club, you would go online and order it, and we would hold it aside. It wasn't really a full basket shop as we looked at that. Adding fresh goods to that funnel has really changed the game. You're seeing a much more fulsome job from these members, much like their normal grocery shop. And they're getting into all sorts of different categories. It looks a little bit like the same-day delivery shop, right? They've got their list on their refrigerator that they pound into the website, and it shows up at their front door. But on our website, now you can obviously feature general merchandise stuff. One of the big challenges is not losing the treasure hunt. That's a big part of the club business when you're online, right? You want that opportunistic purchase, that extra thing that people throw in their basket. And designing the website around that is important. And then we launched curbside as well this year, and that's been an overwhelming home run. In the fourth quarter, over 50% of our orders were delivered curbside. And that really impressed us. The speed of adoption has been quite amazing. All of those baskets more or less look the same, which is to say they are much larger than a traditional in-the-club basket. For a long time, ignoring the last year given the pandemic influences, our average ticket inside the box was about $95. Our digital baskets are around $150, right, so much, much bigger than a traditional sale. And they include all sorts of different categories as well. So you can see people getting around the club in their basket, which is important. When you think about the economics of these businesses, they're different than a traditional shop obviously. Same-day delivery is the easiest one to explain because it looks just like a traditional sale to us. Because we give members the same pricing, as if they came into the club, on the goods, and then we tack on a delivery fee on the top. That delivery fee flows right through us and goes to Instacart to fund their folks picking and delivering that product. So to us, it looks perfect. To the member, it looks potentially a little bit more expensive versus a traditional sale. But if you think about it as against grocer, they're saving 25%, 30% on their order. And then you subtract the delivery for you, they're probably still saving 15% to 20% on their order. And it's brought to their house. So if they're valuing their time at all, it looks like a good trade from their perspective. The BOPC and curbside businesses look a little bit different, obviously because it's our folks doing the picking and the delivery to your car if you choose curbside. So versus a traditional sale, they are a bit dilutive economically. But the incrementality of the purchasing tends to pay the bill for that. So as we look at it, we're clearly comfortable growing these businesses. As we look at our economics versus others in the industry, we feel like we are advantaged from that standpoint, given we're picking in our warehouse format already. We are picking $10 average tickets versus 3 in a grocer. We're picking from 7,000 items, not 70,000 items. So we can do it much more efficiently and really take advantage of our format.

That's great. Well, we're running up in time. Bob, thanks again for joining us today. Hopefully, we can do this in person next year. Have a great rest of the day. And thank you, everyone, for joining us.

Yes. Thanks, everybody, for your support and your questions. And Mark, thanks for hosting.

Absolutely. Take care, everyone.