Sam’s Has a Grocery Plan
Okay, we admit that at first reading that Sam’s Club’s goal of capturing 20 percent of its club members’ grocery expenditures made us think of pigs trying to take flight in costume wings. But perhaps that number is attainable considering Sam’s recent performance. The additional $18 billion it would generate for the warehouse club chain would certainly be good for both its top and bottom lines.
According to a Reuters report, Sam’s used Nielsen Homescan data to determine one of its two major club competitors (BJ’s or Costco) had captured 20 percent of its members’ grocery purchases. Acting on that information, Sam’s, which captures about 12 percent of its members’ purchases, has expanded its grocery offerings. It has also introduced smaller pack size,s a la BJ’s, to encourage individual purchases.
A recent Wall Street Journal piece said the chain has intentionally tried to go more upscale with club remodels, additional fresh foods and pricier items such as jewelry.
"The most noticeable improvements have come in the quality of the merchandise available in clubs," Budd Bugatch, retail analyst at Raymond James, told the Journal. "Previously, there had been a wide real and/or perceived quality gap between Sam’s and its major competition."
Whatever Sam’s has been doing of late appears to be working. The club, which ranked first among its peers in the 2011 Brand Keys Customer Loyalty Engagement Index, saw comparable location sales increase 4.2 percent in the first quarter. Grocery items were among the strongest sellers.
Sam’s is looking to attract new members and keep existing ones by not only offering a greater variety of groceries, but by holding the line on prices. Linda Hefner, chief merchandising officer for Sam’s, said the chain had decided to keep its price for rotisserie chicken under $5 even though its costs had gone up. It also worked with suppliers to downsize products to keep them at certain price points rather than charge members more.
The chain announced yesterday that it was rolling out three new private labels as a means to offer more variety at better prices to its customers. The new brands include Artisan Fresh, a line of baked goods; Daily Chef, shelf-stable grocery items; and Simply Right, a collection of personal care products. The products will be available chain-wide by October.
- Sam’s Club aims for more of members’ food buys – Reuters
- Sam’s Club Buoys Retail Giant – The Wall Street Journal
- Sam’s Club unveils new store brands – The Associated Press/Forbes.com
- 2011 Brand Keys Customer Loyalty Engagement Index – Brand Keys
Discussion Question: What are your thoughts on the current direction of Sam’s Club relative to its competitors? What is right, or perhaps misguided, about its grocery strategy?