By Lavern Clarke, Staff ReporterAS PRICESMART edges closer to finalising construction on the first of two shopping warehouses it is building in Jamaica, the American company has indicated that it will be investing an additional J$55 million in its start-up operations here.
The company now says it will spend US$7.5 million to $11 million per warehouse (J$375-550 million), up from the US$7-10 million announced a year and a half ago. PriceSmart which has operations in 29 countries spread across different regions of the world, told Wednesday Business that the amount is 'typically' what it invests in its warehouses.
The first warehouse is under construction at Red Hills Road in Kingston. Originally scheduled for opening last year summer, the company is now looking to Easter as a more feasible date, having missed its rescheduled Christmas opening.
Headquartered in San Diego, PriceSmart which did over US$600 million in net sales last year, has partnered with the Myers family in the Jamaican venture but holds majority ownership in the business. The Myers have
proven success in the fast food business as operators of the local KFC and Pizza Hut franchises.
PriceSmart's own expectations are that once it enters the Jamaican market, prices will fall, based on its strategy of buying high volumes at bulk rates, keeping advertising and overheads costs low, and passing on those savings to customers.
"It is a fact that we lower market prices. The competition pushes everyone to be more efficient," the company said in written response to Wednesday Business queries on the status of its start up plans, attributing the comment to PriceSmart president and chief executive officer Gil Partida.
"We sell to our member-customers at the lowest possible margin per item. This generates high volume sales at the warehouses, which perpetuates the cycle of volume discounts."
A small portion of the funds invested is being used to finance a side project to improve the roadway, sidewalk and vehicular traffic in the vicinity of the Red Hills Road store which is still under construction - all improvements that will facilitate access to the site and ease of movement for the merchandiser's customers.
The side project, billed at US$100,000 (J$5million), includes a new traffic island at the intersection of Valentine Drive and Red Hills Road to improve traffic flow.
"This should alleviate the congestion caused by the stop and creep style of this intersection," PriceSmart said.
The company has also put in a sidewalk at Valentine's Drive, is constructing a new bus lay-by, and is repainting and cleaning the area ringing the site "including some private businesses and homes."
