Sam’s Club tunes up formats
October 28, 2008,
Bentonville, Ark. – Club remodels and three test prototypes are on the menu at Sam’s Club as the country’s No. 2 warehouse club seeks to expand memberships, executives said this morning during Wal-Mart Inc.’s 15th Annual Analyst and Investor Meeting.
While remodels are adjusted by club, the model generally has three key changes:
To appeal to mothers, apparel, basics, domestics, small appliances and cookware have been pulled together next to fresh grocery.
To create excitement and visual impact, seasonal has been moved to the front and center of the store.
To appeal to business members, office categories have been pulled together to create a full office environment.
About half of Sam’s U.S. clubs have already been remodeled. The pace is expected to double next year, said Greg Johnson, evp for operations.
In addition, Sam’s Club today announced three new prototype tests.
Last week, the company opened a smaller format club in Garden City, Kan., a community with a population under 40,000. So far, sales and memberships are running ahead of plan, said McMillon.
In August, Sam’s launched a Business Center in Houston that for the first time provides delivery. To emphasize its service to the business community, the club has eliminated several consumer goods categories.
Next year, Sam’s will launch its first Mas Club in Houston. The 143,000-square-foot club will carry a selection of Hispanic foods and international brands imported from Mexico and other Latin American countries. There will also be space for an outdoor shopping and event area, and the club’s café will offer freshly made tortillas. Mas Club membership will be distinct from Sam’s Club membership.
“We believe we need to reach out to an entirely new set of members,” said McMillon.
McMillon acknowledged that the tough economy has impacted general merchandise sales in the clubs, noting that diamond sales are down by double-digits. However, he said, the club will not start knocking down price points to drive the top line.
“Our focus is on holding the quality level and managing the units so we don’t come out of the economic cycle with our reputation damaged.”
Asked during the Q&A portion of the presentation why Sam’s continues to lag warehouse club leader Costco, McMillon pointed to product quality and consumer perceptions.
“Our product quality needs to improve and be very consistent,” he said, adding Sam’s needs to improve its communication with members. “I believe our brand is under-valued.”
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