BENTONVILLE, Ark. — Sam's Club here is beefing up the space it allots in its warehouse clubs for fresh-food items, including produce, meat, meal solutions and bakery, executives said at an analyst meeting here for Sam's parent company, Wal-Mart Stores.
In addition to its Business- and Advantage Plus-level members, Sam's has “a third very important group to serve,” said Brian Cornell, the former Safeway executive who took over as president and chief executive officer of Sam's Club in April of this year. “It's that business member who shops us for their family needs. They will be shopping us on Monday through Thursday for their workplace, but they come back on the weekends and shop us for their personal and family needs.”
To better reach that customer, Sam's is focusing on improving the quality of the perishables offering and devoting more space to it, accelerating the development of private-label products and prioritizing data-driven customer insights.
“We want to make sure we know more about our member than anyone else,” Cornell said. “So going forward, you are going to see us focus on a very select number of initiatives. We are going to major in the majors.”
A new club layout called “Project Portfolio” that seeks to optimize the merchandising mix has received some positive feedback from members and will begin rolling out to more locations. In addition to the expanded perishables offering, the new layout also includes “more logical” product adjacencies, a new center aisle and clearer sightlines, the company said. Analysts were given a tour of the new layout at a Bentonville location during the meeting.
Consulting firm Management Ventures Inc., Cambridge, Mass., said Sam's new merchandise optimization strategy — essentially a form of category management — does not align precisely with Wal-Mart's “Win, Play, Show” SKU rationalization effort, but may force suppliers to think differently about how they approach the retailer.
“Though the number of total SKUs will remain the same, the mix will shift to emphasize those categories that rank high on both the relevance (trips) and differentiation (basket) scales,” said Brendan Langan, director of retail insights at MVI, in a report last week.
The merchandise optimization looks at products as falling into one of four buckets: “convenience, everyday needs, excitement and ‘wow,’” with the latter being items that are both highly differentiated and highly relevant.
Linda Hefner, executive vice president of merchandising at Sam's Club, said that in addition to produce, meat, meal solutions and bakery, the chain is expanding its offerings in baby care and HBC, all at the expense of other general merchandise categories.
“These fresh and consumable categories are large, growing and highly productive, and we have very good reason — quantitative research — to believe we can accelerate our share growth in these areas,” she said. “We have an opportunity to earn more share of [members'] wallet, and that's our goal in these categories,” she said.
The chain is seeking to take market share away from grocery and specialty stores, she said, citing a recent study showing that Sam's prices are 30% lower than competitors in those more traditional retail venues.
“In a macro environment of value-seeking consumers and shoppers, these other channels are a very important source of volume growth for Sam's Club,” Hefner said.
The chain is implementing a new pricing scheme for the first time, lowering prices on select “known value items,” or KVI, and using data analysis and price-optimization tools to target specific products “surgically” with new, reduced pricing.
Sam's is also rolling out a new discount program for its Advantage Plus members — those that enroll at a $100 annual rate — that includes customized offers based on past purchasing history. The new “eValues” program, which uses a proprietary platform to customize offers based on past purchasing history, touts double-digit discounts that show up when the Sam's Club membership card is swiped at the checkout register.
“It allows us to match the offers to the right members, the ones that are highly relevant to them,” Hefner explained.
Members can look up their targeted offers on their personalized Web pages or in-store at the membership desk or at eValues kiosks.
“It's a simple and relevant program that delivers additional savings to our members to give them a reason to upgrade and a reason to renew at the Plus membership level,” Hefner said.
Since the program debuted in August, Sam's has doubled the number of members who upgrade to the Plus level each week, she said.
As is the case with the rest of Wal-Mart's operations in the U.S., Sam's Club also plans to focus more on remodels than new-store builds in the coming fiscal year.
The company projected capital expenditures of between $700 million and $1 billion for its Sam's Club U.S. operations in fiscal 2011, which begins in early 2010. That would fund between five and 10 new, expanded or relocated clubs and between 70 and 90 remodels.
Those figures compare with an estimated 15 new clubs opened in the current fiscal year and about 50-55 remodels. It expects to spend between $800 million and $900 million in cap-ex this year.
“We remain committed to opening and operating the optimal number of clubs, in the right sizes and formats, in locations that make the best use of our capital,” Cornell said in a prepared statement.