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Sam’s Club has plans to differentiate itself from its parent Walmart and create a stronger financial model for itself. In this PLMALive! report Len Lewis has the details.
The late Sam Walton freely admitted that he got the idea for Sam’s Club from Sol Price the founder of Price Club—which is now Costco.
Thirty-two years later, Sam’s is still evolving with 12 new clubs and 55 remodels scheduled for 2016.
Its 650 stores across the U.S. produced sales of $58 billion in fiscal 2015, or about 12 percent of Walmart’s total revenues.
Part of it comes from membership fees, which were up 10 percent last year to approximately $3.2 billion.
Fees are also a big part of the company’s operating earnings, enabling Sam’s to even undercut its parent Walmart on gross margins, according to industry watchers.
But Sam’s association with Walmart is sometimes a mixed bag.
Walmart’s clout with suppliers and its extensive supply chain enable Sam’s to reduce margins and keep prices low.
On the down side, about one-third of Sam’s Clubs share a parking lot with a Walmart store.
Because their product offerings are similar, some analysts question whether consumers will shop at Sam’s when they can get the same items at Walmart without paying the membership fee.
Some observers say Walmart is Sam’s biggest competitor. While management disagrees, even Rosalind Brewer, president and CEO of Sam’s has stated: “We want to be less of a Walmart.”
Sam’s is taking steps to differentiate itself from Walmart in order to expand sales and retain more members.
Private label is near the top of the list.
The company is shifting emphasis to its signature private label brands like Member’s Mark, not only to increase sales, but also to boost its leverage with suppliers the way Costco does with its Kirkland label.
The company will be testing upscale Sam’s stores in two regions, with a special buying team. The emphasis will be on prepared meals, higher end furniture and apparel to attract consumers that might shop at Whole Foods. Overall, about 150 Sam’s clubs are located in high income areas.
In order to appeal to upper income customers, Sam’s has also more than doubled its portfolio of organic and natural products to over 200, including breakfast bars, squeezable fruit pouches, protein drinks and organic produce.
Its strategy also includes increasing e-commerce investments in Sams.com to improve online ordering by regular consumers and its Club
Pickup mobile app that will enable business members to order online and pickup in store.
In another move to attract higher income shoppers, Sam’s has signed a deal to accept the American Express card after its rival Costco cut ties with the credit card company.
If all these moves are successful, then Sam’s will have an even more powerful economic model that could eventually catapult it to the top slot in the warehouse club industry