Quarter Century of Rapid Growth for Sam's Club

ELLIOT ZWIEBACH

When Wal-Mart Stores opened the first Sam's Wholesale Club in Midwest City, Okla., in 1983 it was intended as a vehicle for parent Wal-Mart Stores to enter urban markets.

Within five years, the club had 104 locations and 7 million members.

During that period, however, the company altered its strategy and began opening clubs adjacent to its discount stores in more-rural locations.

Sam's grew in part through acquisitions, including 11 Super Saver Wholesale locations in 1987 and 27 Wholesale Club units in 1990 — the year the company changed the name of its warehouse-store business to, simply, Sam's Club.

In 1993, Sam's acquired 99 Pace Warehouse locations from Kmart.

However, rapid expansion and increasing competition resulted in negative comparable sales in 1994.

It was during that period of its history that Sam's was considered “the ugly stepsister at Wal-Mart,” Deborah Weinswig, an analyst with Citigroup, New York, told SN. “There was a lot of turnover and a lack of any consistent strategy for a long time.”

But with the appointment in 2002 of Kevin Turner as president and chief executive officer of Sam's, the company recommitted itself to focusing on small businesses — a process “that helped the company reshape its thinking and develop a clearer focus on who its target member was and how to merchandise to that member,” Weinswig explained.

Under Turner, Sam's adopted the slogan, “We're in business for small business,” with small businesses defined as those with annual sales of up to $2 million.

Sam's broke those businesses down into seven segments: convenience and retail stores; foodservice; beauty salons and barber shops; contractors and maintenance companies; childcare, schools and churches; vending machines and small offices; and motels and bed-and-breakfast owners.

Turner also introduced the “1-2-3” program — a commitment to go after business customers first, get those members to shop for their personal needs second and go after individual club members third.

He also added more business services and upscale merchandise to Sam's and invested in remodeling. During his watch, Sam's also launched a catalog division, added gas stations and introduced other ancillary services to bulk up the clubs' appeal to business members.

When Turner left to become chief operating officer of Microsoft in 2005, he was succeeded by Doug McMillon, who has strengthened the food operation to boost store traffic while continuing to add products and services to create a small-business solution center.

According to TNS Retail Forward, Columbus, Ohio, Sam's members are typically more rural and less affluent than members of either Costco or BJ's, with half of them having annual incomes under $50,000.

Most Sam's members are over the age of 55 and live in small- to midsized markets.

Business members pay an annual fee of $35; individuals (Advantage members) pay $40 a year; and for $100 a year both groups can upgrade to a Plus membership, which provides additional benefits, including extra discounts.