The slogan of the Makro Self-Service Wholesale Center in Largo, Md., is, "There's nothing else like it," and for once a business slogan is unarguably true.
There is nothing else like Makro's sprawling warehouse and store, at least in the Washington area. The only similar establishments in the eastern United States are the Makro centers in Atlanta and Philadelphia.
There's no question that Makro is different; but there are questions about whether the Makro formula, imported from Europe, will work here, and about what place Makro will eventually carve out in the area's food and general merchandise trade.
Makro officials say they expect sales of $50 million in this first full year of operation in Largo, and they anticipate quick expansion in the Washington-Baltimore area. What is still not clear, however, is at whose expense is Makro making inroads? Traditional wholesalers? Retail grocery stores? Discount chains? Makro evidently has the potential to take business from all of them.
Makro is a self-service, cash-and-carry wholesale distributor of food products, housewares, appliances, clothing, sporting goods and office supplies and equipment. In its 200,000-square-foot building, not far from Capital Centre, some 35,000 products ranging from imitation Provolone cheese to personal computers are sold to shopkeepers, restaurateurs and other approved clients who pay cash and haul the goods away themselves. Makro extends no credit, makes no deliveries and, at least in theory, accepts no retail customers.
Unlike conventional wholesalers, who specialize in certain types of items, Makro carries a staggering array of merchandise: fruit, paint, condiments, liquor, lawn furniture, fresh meat, socks, paper products, towels, jeans, cereal, pet food, jewelry, auto accessories.
It resembles an overgrown Memco store, but Makro says it cannot be "confused with other discount stores or other so-called wholesale outlets" because it is not open to the public and membership cannot be purchased.
A similar concept of cash and carry wholesale marketing has been developed by the Jetro stores, based in New York, but Jetro sells only food. Another chain, the Chicago-based Metro, resembles Makro in product mix but carries less than half as many items, according to accounts in the trade press.
Although it is making a major push into the U.S. market, Makro does not compete directly with any existing business. According to Makro executives, their primary customers are small businesses and service organizations that do not buy in the quantities shipped by conventional wholesalers and will pick up the merchandise themselves to save on delivery and billing costs.
Makro officials say there are about 80,000 potential customers--sandwich shops, professional offices, taverns, caterers, church organizations--within a 35-mile radius of the store, and 50,000 have signed up for their "Makro passport" since the wholesale center opened in February 1981.
Jan W. Juergens, president of Makro Self-Service Wholesale Corp., the U.S. arm of a privately held Dutch conglomerate, said the Largo store "will do over $50 million in sales this year." That is $20 million less than the sales volume Makro projected for its first full year of operations, but Juergens said it meets Makro's expectations.
Makro, a subsidiary of SHV Holding, of Utrecht, the Netherlands, says it has 41 stores worldwide, with total annual sales of about $3 billion. Its attempt to duplicate its European success in the United States began with the opening of the Largo outlet last year, followed by the Atlanta and Philadelphia stores. A fourth store is scheduled to open in Cincinnati this summer, after which, Juergens said, the company will stop to evaluate its progress.
He said it was possible Makro would decide the U.S. market "does not meet our expectations," but the "more probable" course was expansion within the four metropolitan areas where Makro will be operating by this summer. Makro will probably put a store in the Vienna area of Northern Virginia and another near Baltimore, he said.
"We knew this was a pilot project," he said, "but we were convinced it would work. You have to be convinced of that to invest $100 million."
That investment was financed out of Makro's own resources, he said, so the U.S. operation is free of debt. Because of the cash and carry policy, he said, Makro has no accounts receivable, which means no costly bookkeeping staff and no uncollectible bills. "We get the money sometimes even before we pay our suppliers," he said.
Other wholesalers say that Makro's prices are generally competitive but not always the lowest, which Makro admits. "Our price might not always be lower," said sales promotion manager Don Katzen, "but even if it isn't, we have everything in one place, there's no waiting, and we don't charge extra for small quantities."
Makro envisions itself as a "secondary supplier" for stores or restaurants that need food or other merchandise on short order or in small quantities, and as an alternative source of office supplies, cleaning gear and other essentials for professionals such as doctors who might otherwise have to buy at retail.
"We're not for the biggest retailers or the biggest restaurants," Katzen said. "We're for the little guy." Katzen said, however, that Makro makes no attempt to determine what use its customers make of the merchandise they buy, so if a sandwich-shop owner picks up a television set or wristwatch with his bologna and coffee, it may well be for personal use. Those transactions come at the expense of other discount stores.
The well-established wholesale food dealers in the area say Makro is no threat to them because Makro serves small businesses in small quantities, while they cater to large restaurants and institutions that need delivery and credit.
"We feel that Makro has had negligible impact on our business," said Bill Eacho, vice president of Atlantic Institutional Supply in Alexandria. "They serve a different market. Our company is oriented to distribution to much larger accounts."
Jim Cremins, sales director at Feldman & Co., the area's largest wholesale food supplier, said Makro was "not a lot of competition for us." Feldman, he said, supplies large quantities to large restaurants and institutions, and has imposed a "minimum delivery requirement" to eliminate the small orders that Makro is seeking to fill. The average invoice for orders "going out our door" is $400, he said, compared to the average cash-register tally of $100 for Makro customers.
Cremins and other wholesale distributors said the real key to Makro's development of large sales volume was to fudge Makro's ostensibly strict access rules--a suggestion substantiated by random interviews with customers in the Makro parking lot.
Makro says it grants "Makro passports" only to customers who present a business or professional license or tax-exempt organization certificate. According to Katzen, customers who present their Makro passports must also present another form of identification, with photograph, to verify that they are the one named.
But there is clearly some leakage in the system. One woman loading cases of soft drinks and paper products into her car said, "I bought this for myself. I borrowed my friend's pass when I heard there was a special, though I probably shouldn't tell you that."
A man from Middleburg, Va., who declined to give his name said he was shopping for a group of families who formed themselves into a "co-op" to take advantage of Makro's prices. "We do this about twice a year because it saves us money," he said. "It's perfectly legal."
Another customer asked for, and was issued, a one-day pass when he promised that everything he bought would be shipped out of the country with his household goods the following week.
One shopper who was glad to be named was exactly the kind of small-business operator Makro seeks to attract. Ernesto Glorioso, who operates a small catering service, said he shops at Makro regularly because "it's convenient, it's nearby. Some prices are higher, but the main thing is the convenience. If I need two or three cans of something I don't have to buy a whole case." At Makro, he said, there is "no waiting" for orders to arrive.
Another category of Makro customers is composed of the church organizations and service groups, which Feldman & Co.'s Cremins described as "the firehouses and the clubs." Katzen said Makro encourages groups such as the women's guild of Bishop McNamara High School to shop at the center.
Those that do can stock up for social affairs or raffles--and for the personal use of their members--at prices such as these, observed on a recent visit: red delicious apples, $5.18 for an eight-pound bag; breakfast link sausage, $1.62 a pound; Glidden latex semigloss paint, $14.40 per gallon; Levi's jeans, $14.50 a pair; American Tourister 5-inch attache case, $29.90; 24 cans of Dinty Moore beef stew, $10.80; Canada Dry soft drinks, $4.92 for a case of 24 cans.
Church groups have traditionally been classified as institutional customers eligible to buy from wholesalers, an experienced food-industry analyst said. But they often do not purchase quantities sufficient to justify the dispatch of a truck from a wholesaler such as Feldman's, and would therefore find Makro a natural source. In addition, he said, the knowledge that church groups can pick up television sets and stereo equipment along with the potato salad is a strong inducement to shop at Makro.
Katzen said that professional customers such as law offices are limited to the nonfood area of the store, but customers approved for food purchases may buy anything in stock, including the appliances. The only restricted items, he said, are alcoholic beverages and tobacco products, which are sold only to holders of Maryland liquor or tobacco licenses.
Liquor, beer and wine, Katzen said, were the only products that Makro had been unable to obtain in the variety and quantity it sought, not because the manufacturers refused to deal with Makro but because Maryland law permits exclusive distribution agreements and all the most popular name brands are already sewn up by existing distributors.