Between 1983 and 1984, three retailers opened in the United States that would drastically alter the landscape by introducing a new business model to consumers. The retailers were Costco, Sam’s Club and BJ’s and the mode was wholesale club for consumers. While the specifics vary some, at the base, the experience is similar — consumers sign on for memberships, which give them access to shop the club throughout the year. All offer fresh grocery items, general merchandise and consumer package goods — generally at a discounted price and sometimes in bulk.
The memberships are also tiered, so that different levels get additional rewards like cash back on purchases, free shipping on eCommerce orders, travel discounts as well as access to specific special events and offers.
And at the base, SamsClub.com CEO and Executive Vice President of Membership & Technology Jamie Iannone told Karen Webster for this week’s edition of the Monday Conversation, that core experience and appeal of Sam’s Club to middle-class families has been remarkably consistent in the more than three-and-half decades Sam’s has been open and part of the retail giant Walmart. What they see today, he noted, is similar to what they’ve seen over the last 20 years: families with household incomes between $75,000 and $125,000 a year with a higher than average percentage of small business owners.
“I would not say we set out with a certain profile of [small- to medium-sized business] SMB users; we try to recruit by segment, I think it happens that we do work with these families, encounter a lot of SMB owners who see a lot of opportunity to buy various supplies. As we saw that occurring in our data, we have been able to then build things like the digital portal for business owners as we realized the mix of products we offer is of value to businesses.”
And the story of how they’ve expanded and adapted to SMB owners at Sam’s Club in some ways offers a microcosm of how the firm has spent the last few years evolving the wholesale club experience from its purely brick-and-mortar early ’80s roots into a rapidly digitizing retail landscape. In some ways, he said, Sam’s Club has gone from being a retailer to a tech company — he told Webster that they often joke in-house that they are the world’s only “tiny, $60 billion start-up.”
“We’ve seen an omnichannel member is more engaged and doing more across the business. And because of the club relationship we have with customers, we can offer a level of digital personalization that is tough to match.”
Recreating The Customer Journey
The two key words that Sam’s Club keeps at the forefront as they are reformatting and expanding their offerings for customers are choice and convenience. That’s why they installed scan-and-pay technology, called Scan & Go, so that customers could skip the check-out by essentially turning their phone and the app into their point of sale (POS). It’s why, he noted, they added the ability to buy alcohol with the app at certain clubs this year, because customers said they loved the functionality and would love it a whole lot more if they could also use it to buy beer.
It’s why they’ve expanded and sped up their buy online, pick-up in-store program, Club Pickup — while at the same time partnering with Instacart to make same-day delivery widely available from their stores. Webster wondered if the expansion of same-day grocery delivery ran the risk of perhaps cannibalizing the same-day grocery pick-up business — but Iannone noted that while there is some possible risk of overlap, what they’ve mostly seen is that it “really depends on the individual customer’s needs.”
Some customers, he noted, have time to be at home during the delivery window and are grateful for the opportunity to not have to go out. Some customers, he said, are already going to be out and want to be able to fit their pick-up alongside other activities in the world that day.
“And we have a large cache of consumers who don’t want any of this — they are treasure hunters who are at the store to see what they can find,” he said.
For Sam’s Club, it isn’t about picking which of those customers they want — they want all of them, and the advantage of a sophisticated digital mechanism built around an established membership base and a widespread network of physical locations is that they can provide for all of that. So, he noted, curbside pickup has been around for a few years — but it’s always a work in progress. As of today, he said, for either the delivery or pick-up customer it is easy to build their entire standard grocery run basket in less than two minutes — because the artificial intelligence (AI) they use in the background keeps track of what the customer buys and how often and places it provisionally in the cart. Instead of searching for items, the customer is checking off selections.
Moreover, he noted, the dedication to technological improvement isn’t limited to the customer-facing front end. On the backend, stores that closed have seen second lives as distribution centers to beef up its eCommerce offerings and make it that much easier to put an order in a consumer’s hands as early as the next day. They’ve integrated voice into their employee-facing software and devices with a new program called “Ask Sam,” which does exactly what the name implies. If the associate needs to find another worker, have a sign printed out, find where an item is shelved or order it on the spot for the customer — all of that can now be accomplished with their voice interface by “asking Sam.”
“What’s great about it is it is also run on a machine learning algorithm, so the more questions you ask it and the more tasks it is assigned, the better it gets at helping,”
And, more broadly, he noted, that is the goal of all the innovations — make them better at helping customers get what they want, how they want it.
Building Tomorrow’s Customer Base
Retail is always an invention and reinvention game, Iannone told Webster. Wholesale shopping got its start on the premise that it could give middle-class customers better value — and at base that is always what they are looking to demonstrate. When they send out renewal information, he noted, they can now precisely calculate how much a customer saved by shopping at Sam’s Club in the last year, and they make sure to pass that data right on along to their customers.
And as they are looking to recruit that next generation of consumers — millennials in general and bridge millennials in specific, it makes a big difference to have the right set of experiences in play. They are online orderers, he noted, they so vastly prefer Scan & Go to waiting in line.
“And we’ve gotten very good at finding the life events that match them with membership. You’ve bought your first home, you’ve had your first child — we can delivery on savings of money, but also bigger things like saving you time and making your experiences smooth and frictionless.”
They’re not done, he noted, because the work is never done — the marketplace has undergone a significant shift in digitization, he said, and it is still ongoing. However, Sam’s more excited by the process of having to keep inventing for it than being daunted by it.