Washington area consumers have been bombarded in recent months with mail and telephone soliciations to join eara "buying clubs" that sell memberships by promising significant discounts on brand-name products.
The barrage was triggered by several clubs that moved aggressively into this area in the last two years, drawn by its affluence and the belief that inflation and consumer belt-tightening have made their service more attractive. At the same time there has been a considerable increase in inquiries, and in some cases complaints, about some local clubs.
The cost of joining three of the clubs ranges from $39.95 to $495, plus annual renewal fees. A fourth has no fee. Club officials say they have more than 10.000 members who can save generally from 10 to 60 percent off regular retail prices on a variety of goods -- furniture, refrigerators, vacuum cleaners, jewelry, cameras and even automobiles.
However, on items that are priced competitively at retail -- such at television sets -- they say the savings may be less than 10 percent. Food and clothing generally are not available.
The Federal Trade Commission, after a three-year investigation into buying-club operations in the Midwest and West, sounded this cautionary note last year.
"Buying clubs' may not save you money at all. In fact, buying clubs can be more expensive than shopping in your local retail store."
Officials of the four buying clubs operating in the Washington area -- and many of the members of those clubs -- insist that the clubs do offer savings, particularly on big-ticket items.
Typically, a member orders according to brand name and model number. One club, the Wholesale Connection, has a showroom in Alexandria. Sometimes the clubs can provide a catalogue; otherwise, the consumer has to get the model number through regular retailers.
The club than arranges through a distributor of manufacturer to get the merchandise at a price that is supposed to be lower than a local retailer would change.
"Definitely, you save money," said Linda Postlethwait, a Fall Church, Va., mother who has been a member of one club, Direct Buying Service, for 18 months. She said she and her husband, Navy Department engineer Vince Juric, purchased living room furniture through the club and saved enough to more than recover the $495 membership fee.
But another member isn't so happy as Postlethwait.
Michael G. Fine, a podiatrist has filed suit against Direct Buying Service, contending that he didn't get the discount he should have gotten on the floor covering he wanted for his Arlington Office. Fine claims it would have cost him more to buy the flooring through the installer the club referred him to than through a regular retail installer. In the case that Fine filed in the Alexandria General District Court -- the equivalent of small claims court -- he asks for a full refund of his membership fee. The case is scheduled for a June hearing.
Direct Buying Service president Charles Minnehan said that the club guarantees the lowest price only when it can obtain the merchandise through regular manufacturer or distributor sources. When the club cannot get the merchandise that way, it may refer the member to a merchant with the best available price, Minnehan said. However the club's low-price guarantee doesn't apply in such a case, he said, "because we have no control over" the referral merchants price. Fine contents that the club contract does promise the lowest price on referral purchases.
Minnehan said the club hopes to settle the matter.
Consumer inquiries about buying clubs have increased dramatically since some of the clubs began sending out mass mailings in the Washington area. For example, the Alexandria Office of Consumer Affairs has received 348 calls -- mostly simple inquiries, but 30 of which developed into written complaints -- from consumers asking about Direct Buying Service, formerly known as Consumer Buying Service, since it opened for business 18 months ago, according to Naomi Medvin. the consumer office coordinator.
". . . Out of 4,000 members, we have only 20 to 30 complaints," said Direct Buying Service president Minnehan. "And Fine is the only [lawsuit] case we have had."
Other local jurisdictions have similarly received many calls -- some complaints -- about local buying clubs. The greastest number has involved Direct Buying Service and the Maryland-based GF Consumer Services; a handful has involved United Buying Service, another Maryland-based club. There have been no complaints reported against the Wholesale Connection, which is based in Virginia.
A spokesman for GF Consumer Services said many of the complaints against his company dated back more than a year and involved overzealous telephone sales techniques by a marketing firm since dropped. He added that refunds have been made to about 2,000 people. A spokesman for United Buying Service said most complaints involved the seller, not the club, and had been resolved.
During 1980, the Better Business Bureau of Metropolitan Washington fielded 689 inquires about buying clubs. During the past three years, it has recorded 19 complaints against Direct Buying Service, GF Consumer Services and the GF parent company, Group Financial Corp. The majority has been resolved, said Ann White, a spokeswoman for the bureau. She said the bureau hasn't received any complaints against the Wholesale Connection or United Buying Service.
Here is a summary of the clubs and how they function, according to club officials:
Direct Buying Service, with offices in Alexandria, Lanham and Rockville. In operation since October 1979, the club has a membership fee of $495. The annual renewal fee is $36. Minnehan estimated that the club has 4,000 members locally.
DBS has mailed out "tens of thousands" of notices, Minnehan said, to them one of five prizes: a television, a stereo, a dinette set, a set of tires or a $100 gift certificate. To get the prize, the recipient must go to the DBS office to listen to a presentation about the company.
The Wholesale Connection 5706-A General Washington Dr., Alexandria, opened November 1980. Regular membership costs $450 (discounts sometimes available), with a $25 annual renewal fee. Store manager Jayne Gilber estimated that there are 425 to 430 local members.
The club has mailed 10,000 notices to area residents offering one of five gifts -- cookware, a television, a watch, cutlery or $100 worth of groceries -- to those who come to the club's showroom to hear the presentation.
GF Consumer Services, based in Rockville and available to the public for two years. This club may soon change its name to Consumer Central, according to Marvin Yoder, its president. He said GF grew out of Group Financial Corp., an investment company in business for 10 years. Membership initially was $79.95 a year, but recently was reduced to $39.95 per year, Yoder said.
He said more than 6,000 local people have joined GF Consumer Services, which he described as "more than a buying club." He said that in addition to providing discounts, the company can direct members to bargains on everything from travel to tax services. GF relies on telephone and mail solicitations to reach potential members.
United Buying Service, 5480 Wisconsin Ave., Chevy Chase. In business for 14 years, United doesn't charge membership fees, according to manager Monday Taylor. To receive the club benefits -- which permit the member to purchase an automobile for $100 more than dealer cost at participating dealerships and to buy items such as furniture at a discount -- a person must be a member of one of approximately 1,600 qualifying employe groups.
FTC officials, after concluding their national investigation of buying clubs in March 1980, issued a "consumer alert" fact sheet with these points to remember:
Promised savings. If the club claims 25 percent savings, the first question to ask is, "25 percent off what?" Don't accept what the club says or shows in its catalogue as the "suggested retail price" or "manufacturer's list price" as the basis for a comparison of savings, since many discount stores routinely sell below those prices. Comparison shop at local retail stores.
Instability of buying clubs as business organizations. The FTC said only two of more than 200 clubs investigated had been in business for more than eight years, and 192 clubs across the nation went out of business during the three-year investigation. The clubs checked by the FTC were located primarily in the West and Midwest.
High-pressure sales techniques: The FTC said, "If you must sign up now or lose the chance to join . . . if they'll give you a discount off the regular membership fee today, but not tomorrow . . . or if you find yourself being interviewed to see if you are 'worthy enough' to quality for membership, look out. These tactics don't have to be used by a club offering bargains."