US Insights

Sam's Club strategy shows signs of payoff

Tim Campbell

Senior Analyst

Retail 08.23.2019 / 08:00

sams-club-member-purchases-items

Sam’s Club demonstrates that its strategy is working with room to grow.

Two and a half years ago, Sam’s Club CEO John Furner promised a revamped Sam’s Club with renewed growth, relevance, and vision. In its most recent quarter, Sam’s Club continues to demonstrate proof that its strategy is working with strong performance and room to grow in the future.

Performance

Sam’s Club’s strong performance is partially masked by larger strategic decisions. Sam’s Club continues to feel the effect of its intentional removal of tobacco products with a 3 percentage point negative impact on comps. Excluding the effects of tobacco and fuel, Sam’s Club saw a 4.2% comps increase on the back of traffic increases. On the other hand, multiple quarters of ticket declines are partially due to price and private label investments. These can be sound strategic decisions for the business even if it doesn’t help growth in the short term.

Digital innovation

Sam’s Club continues to optimize its investments in eCommerce and mobile apps. The new Ask Sam and Sam’s Garage app, both launched this past quarter, help associates better assist customers with faster responses to their needs and questions. At the same time, launching same-day Club Pickup nationwide on smaller orders coupled with a new Instacart partnership for same-day alcohol delivery serves its shoppers’ need for fulfilment and immediacy. These advancements have been accelerated by Sam’s Club’s corporate technology office in Dallas and its affiliated nearby test-and-learn club location. We can expect more innovation coming to Sam’s Club over the coming months as these associates continue to iterate on what works best for shoppers.

Assortment Optimization

Regardless of online innovation and optimized efficiencies, clubs live and breathe by the quality and relevance of their assortment. Having faster and more various fulfilment options is only useful if Sam’s Club aligns its assortment with shoppers’ needs. To that end, Sam’s remains focused on expanding private label and challenger brands, rationalizing the remaining assortment where it can, and focusing more heavily on exclusive SKUs. All of these add up to create additional demands and tension on suppliers.

While Sam’s future seems bright, it is not without real challenges. Costco continues to creep into its markets in the South and Midwest, the income of the average member lies well below the club shopper average, and it still needs to contend with value proposition conflation from Walmart. So far, Sam’s is making strong moves to combat these challenges.

Source: Kantar

Editor's Notes

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