The Truth About the Discount Furniture Store

Owning a full time retail furniture store business myself, I don't get much time to watch TV. But when I do, I always come across those infomercials that help you get rich quick from stocks, real estate, and pyramid schemes. The other day I came across a commercial for "Direct Buy" where you can buy furniture and home goods direct from the manufacturer, and pay wholesale prices, where you can join them as a member and get direct access to their furniture store and design center showroom.
First thing I thought was: "What's the catch?"
Because Direct Buy has to make money, how does the customer only have to pay the wholesale prices? So I did some poking around and found some forums and posts where people are complaining that Direct Buy is a scam and their fees are outrageous. Fees? What happened to paying wholesale prices and saving a ton? But there were a few that said they had a good experience. So again, what's the catch?
So after a reading a few posts on the Direct Buy topic at topix and various sources over the web, I got a good idea of what was going on.
The truth about the Direct Buy furniture store and home goods membership:
The commercial - you see it on TV spot ads where they pitch you a great idea about buying direct from the manufacturer and wholesaler. They have testimonials from customers that tell you they saved $20,000, $100,000 etc.
The sales pitch - So you are in the market to remodel your home and refurnish it, and you give them a call or visit their website. They give you a pass or invite you to their showroom tour. You visit one of their local showrooms and they herd you in seminar style and go through presentation slides about how great it is to be a member. Being a member you can buy direct and saves tons of money. And then they tell you how to become a member buy just paying the non refundable membership fee to get all these discounts.
The membership fee - Now are you ready? To know how much it will be to join this great network and become a member to save tens of thousands of dollars? The membership fee is a $5000 for a complete 2 year membership and $200 per year thereafter. (Supposedly, in 1996 it was around $1000).
The purchases - once you become a member after paying that membership fee, you can now have full access to their local showroom and design center to buy direct for your home.
Direct Buy is not the furniture store for everyone:
The way I see it is that Direct Buy is very much like an expensive Costco membership to buy a wholesale prices. So to save a lot of money you have to spend a lot of money. Based on my estimates, you would have to spend over $20,000 to make back the $5000 membership fee to save on discounts. Direct Buy pitches the fact that furniture stores and appliance stores have 200% markups. And that is not always true. If you took that membership money and translated it into some good shopping comparison time you will be able to get mark ups that are almost 10% to 20% above costs at some retailers. There is so much competition among stores and the internet, that prices are very close to cost nowadays, where business owners are just making enough to cover overhead and make money off of higher volumes.