Facing years of falling sales, Sam’s Club is making a move away from the value-conscious consumers who patronize its parent firm, Walmart.
Revenue growth was up 0.5 percent in its last fiscal year, whereas Sam’s chief rival Costco saw a 6 percent increase over a similar period. For the past five years, Sam’s has lagged behind Costco’s growth — taking in $58 billion to Costco’s $110 billion.
“We want to be less of a Walmart,” Rosalind Brewer, chief executive of the warehouse-club retailer, told The Wall Street Journal.
To pursue the higher-end, more affluent shopper, Sam’s is stocking up with name-brand fashions, organic foods and fancy sheets. Mainstream shoppers have turned out to be less an asset to club stores than wealthier buyers who both plunk down cash on a membership fee and then leverage that membership to capture deals on everything from flat screens to beef tenderloins. And non-member shopping hubs are getting in on the bulk discounting act.
Sam’s is now looking to take a page from rival Costco’s book, as the nation’s second largest retailer (number two to Walmart, of course) has focused on building up in affluent areas and has seen its sales soar as a result.
Sam’s Club’s essential problem is that, despite being designed to be a totally separate type of entity from its parent company by founder Sam Walton, the store’s evolution and Walmart’s have evolved them right into direct competition more or less.
“By far, and regardless of region, Walmart is Sam’s largest competitor,” says Sara Al-Tukhaim, a director at Kantar Retail, a consulting and research firm.
According to Kantar, 81 percent of Sam’s shoppers say they also shopped at Walmart in the past four weeks. Only 15 percent had shopped at Costco.
To make the leap and compete more effectively, Sam’s is now embracing technology in an attempt to better know their customers and to draw the higher-income consumers in. Data already gathered indicates that 150 Sam’s Clubs are located in affluent retail pockets, but they are not presently drawing enough of those consumers in.
Sam’s is now running prototypes for two high-end stores. Those locations feature expensive furniture, pre-prepped meals and various other upscale touches.