Consumer Clubs: Are They Worth the Price?

On the weekend my wife and I attended a "by invitation only" introductory meeting for the United Consumers Club. The local one we attended was a franchise of the company started over 25 years ago by Indiana businessman, James L. Gagan.

Gagan had questioned why he should pay retail prices for goods. The middleman, in his opinion, added no value for consumers, just a larger bill. So he established the United Consumers Club. The idea was to develop a private club through which members could buy a variety of products direct from the manufacturer at factory prices.

The idea caught on and over the 27 years of its existence, UCC, now called UCC TotalHome, has grown to 100 outlets, 16 of which are company owned and the rest franchised.

New members are recruited by cold calls inviting them to attend an introductory meeting. My wife got a call like that last week and we attended on Saturday morning.

The description that follows is of the meeting we attended, but I believe it was probably typical of most meetings. UCC seems to be run on the McDonald's Restaurant formula of a replicable business following preset uniform guidelines.

You're greeted at the door and assigned to a sales person - though, of course, they don't call her that. She chats you up and gives a brief overview of the operation. You're told that the dozens of binders on racks on the walls around the room are manufacturer's catalogues which give you a list of their products with factory as well as recommended retail prices. Then you and the other guests are moved into another room for the pitch.

The person conducting our meeting was one of the partners in the franchise. The very polished presentation is a combination of explanation using props and video on a large screen TV. You're told how retail stores buy things from factories, mark them up a huge amount and then sell them to you at these inflated prices. Sale items, you are told, are often marked up way above the recommended retail price to start with and then reduced to a "sale" price that is close to the manufacturer's recommended price. On average, we were told, you would save 45% on things bought through UCC TotalHome.

A number of examples were given comparing items from recent sales flyers with the UCC prices. Most examples were furniture and we got the impression that the focus at UCC and the bulk of their sales is, in fact, furniture.

The video features former CNN anchor Bob Losure, a longtime member of the United Consumer Club. Between the salesman and the credibility of Losure, you're presented with a pretty impressive rationale for joining the club. But then they hit you with the price and the heavy hand.

Since the Club sells things at factory prices - each item sold is custom ordered for you and takes anywhere from days to weeks and sometimes months for delivery - they make no profit on sales. That comes from the membership fee and annual dues. The fee? A hefty $1990. That also covers the first two years dues, after which the annual fee is $159 a year. You sign a ten year contract.

The heavy hand? You have to make up your mind on the spot. If you don't decide to join the club then and there, you're out of luck and won't be able to join for five years should you change your mind. You're told that this is at the behest of the manufacturers who don't want people going out and checking prices at retail stores, going to the club to find out the factory price, then going back to the retail store and trying to bargain them down. In fact, those who join have to sign a confidentiality agreement.

After the meeting with the head honcho, you're taken back to the reading room where you find out a little more about the catalogues. They are divided up into numbered categories and placed on the shelves in order. Categories include a variety of different types of furniture, home electronics, apparel including shoes, housewares, china, plumbing fixtures, floor coverings, recreational goods, stuff for the garden, etc. Around 25-30 categories altogether. Recent suppliers joining the club were listed on a whiteboard and included Carnival Cruises, Icon and Northern Telecom. Most of the over 700 suppliers are well known brands. There is a master catalogue that lists types of items sold and the corresponding category numbers in which to find the items.

Then you're reunited with the sales person who asks you a variety of questions geared to get positive responses and culminating in the request to join. We told our host that we had concerns about the "now or never" ultimatum and wanted more time to think about it, research the company, do some background checks, etc. We were given the number of the Better Business Bureau and invited to call their 24 hour hotline. I did and they got a good report. They'd been in business since November 1997 and a member of the BBB since June 1998. There had only been one complaint to date and it had been satisfactorily resolved.

Nevertheless, I still wanted to do more checking and have more time to think about it. We were told they would let us have until 5:00 PM to decide. Not good enough I told them. We could sign up, then do our checking, and then retract if we weren't satisfied. They'd write the appropriate subjects into the contract. I told them they had it backwards as far as I was concerned. I wanted to do my checks first, and then sign up later if I was satisfied. No dice.

The main big ticket items we might possibly buy in the next year or two are a laptop computer and a hot tub. Neither were directly available from the club. We were told they contracted those out to a couple of local businesses, that the markups were small in both areas and savings to be had were limited.

Before we left I managed to check out a few catalogues and note a few prices. Here is a table of a few selected comparisons.

Item	Factory List	Recommended Retail
Fuji DX10 Digital Camera	$265.78	$499.00
Fuji MX700 Zoom Digital Camera	$532.44	$799.00
Yashica KC600 Digital Camera	$610.00	$749.99
Nunn Bush Shoes Style 83983-02	$32.50	$70.00

Checking around later we found the Fuji DX10 "on sale" at a leading electronics store for $499.99. We found the Fuji MX700 at a leading large drug store chain for $999.98. (Probably to be marked down "on sale" later for $799.99)

I have no doubt that the United Consumer Club is a bonafide business and that they do indeed offer products at factory prices. But I am disturbed by their ultimatum approach to closing a sale. It is a high pressure tactic that is entirely unnecessary. I don't buy the line that the manufacturers are requiring this.

I phoned the Better Business Bureau during working hours and talked to someone about this tactic. They said that it is something they frown upon and they would advise extreme caution.

If a business is on the up-and-up, they should not have to rely on high pressure sales tactics. They should be more than willing to let a potential customer do a thorough background check into the business and to do some comparison shopping and see whether their price claims bear out.

That said, is the UCC TotalHome Club worth joining? Maybe for some. In our case, we have all our expensive furniture purchases behind us. We're not likely to upgrade anytime soon. And saving money in dribs and drabs - $30 for a pair of shoes here, $100 on a lawnmower there and so on, would take an awful long time for us to recoup a $1990 investment. In the meantime we're quite happy with our Costco membership. The savings aren't as great as with UCC, but the fee is only $40!

If we find ourselves in a situation where we are in the market to make a major purchase down the road, we may revisit the United Consumers Club. If it's less than five years from now, we'll see how sticky they really are on their now or never rule.

You can solicit an invitation to attend a sales presentation online by visiting the UCC TotalHome website. The best bet, if you have not already been exposed to their pitch, is to wait until you are in the market for a major furniture purchase of $4000 or more. Then you recoup your membership right away with your purchase.

In the end, a consumer sales club like UCC may become obviated by the Internet. As e-commerce continues to grab more and more of the marketplace we will see increased price competition and a move by manufacturers to sell directly to the public. As Bill Gates points out in Business @ the Speed of Thought, the move in commerce will be to "just-in-time delivery" as Dell Computers has already done so successfully.

Note: Since I wrote this article, I have done a follow-up as I discovered a lot of compalints and even legal action against UCC. See my Shopping Clubs Under Fire article of November 4, 1999. Also see my follow-up of December 21, 2000 - Getting Out of the Deal - with advice on how to get out of a UCC membership if you got fast-talked into one and have had second thoughts.