Sam's Club to focus Member's Mark on sustainability

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Re: Sam's Club to focus Member's Mark on sustainability

Post by storewanderer »

babs wrote: May 17th, 2022, 10:48 pm

The warehouse sector is benefitting by high gas prices and overall inflation driving traffic. Yet Costco keeps pulling ahead with same store sales up over 14% last quarter. The challenge for Sam's is trying to flip members from Costco, as I don't think there are a lot of people without memberships and are open to getting one. That's a daunting challenge.
Let's be realistic- I don't think Sam's is going to flip many members from Costco. Sam's needs to go after folks who are not a member of any club. And there are many such people out there, and that seems to be who Sam's is going after. Costco isn't for everyone. The experience and overcrowding turns many people off. Some people don't find much product they are interested in at Costco ("value" vs. the lowest/cheapest price for stuff).

There may be the few people out there who will pick Sam's over Costco because it is more convenient or less crowded or some other reason but I do not see many Costco customers switching to Sam's because Costco's trap is just too good of a trap.

The segment that interests me is the segment that holds memberships with both Costco and Sam's. That strikes me as the customer where there is a chance to grab some share from Costco with. Sam's also seems much less productive in fresh/perishable food than Costco but Sam's meat department is coming around and their produce department is better than Costco. Their bakery/prepared food is pretty weak but I'm not sure how much sales those would generate even if they managed to triple or quadruple the business in those areas if it would be worth the effort.

What would be funny here is if Sam's is actually flipping customers from Wal Mart. Which I suspect there may be some of happening... which isn't very productive.

The numbers don't lie. The Sam's in my area is much busier than it was 5-7 years ago. I thought the store was a candidate for closure about 7 years ago as inventory got really low for months and traffic had been low. The store has just done better and better the past few years and changes in their strategy/merchandising and the membership promotions have really driven traffic. Sam's is an easy place to shop; it is pleasant and efficient. It is not chaotic like Costco. There are still few to no lines for anything. The people that work at Sam's are exceedingly helpful and when I couldn't find a couple items and the self checkout person came over and asked me if I found everything okay, I was somewhat annoyed by the out of stocks and while I usually just say yes and move on, this time, I decided to be a jerk and say actually I was looking for x item and y item and the employee immediately got someone to check and they were able to pull x item for me out of the back saying it had come on a truck they hadn't put out yet and told me y item was coming in tomorrow and asked if I wanted one held for me to pick up. I didn't take them up on the hold offer but this level of service far exceeded my expectations.
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Re: Sam's Club to focus Member's Mark on sustainability

Post by jamcool »

The credit card acceptance may be a reason-Costco only takes Visa while Sam’s Club takes all cards (even JCB and Union Pay)
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Re: Sam's Club to focus Member's Mark on sustainability

Post by storewanderer »

jamcool wrote: May 18th, 2022, 12:15 am The credit card acceptance may be a reason-Costco only takes Visa while Sam’s Club takes all cards (even JCB and Union Pay)
Do all Sam's take all cards or do some only take certain cards? I was told somewhat recently that some Sam's still only take some card types.

I felt like when Costco moved to Visa, given Visa's very high market share, it opened a lot more folks up to Costco who were avoiding it due to the credit card acceptance situation.
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Re: Sam's Club to focus Member's Mark on sustainability

Post by HCal »

I haven't seen a Sam's Club that didn't accept all the major credit cards. My guess would be that they piggy-back off Walmart's merchant agreements.

I think Sam's Club's main draw over Costco is superior technology. Costco's tech is firmly stuck in the 90s. No ability to check items/prices in stock online, no scan-and-go, costco.com orders often cancelled/misdelivered, etc. They run their basic operation well, but Sam's is using better technology to attract members.

With that said, I think the recent growth at Sam's is the exception, and not really sustainable in the long run.
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Re: Sam's Club to focus Member's Mark on sustainability

Post by buckguy »

The people I know with more than one store membership seem to own small businesses which enable them to cherry pick strengths. Or else they keep forgetting to cancel the one they rarely use.

If they're using promotions to generate traffic, that's just going to attract cherry pickers given the kind of business that they are in. Walmart seems to hold on to its weaker businesses for a long time. I expected they would have left their marginal foreign markets long ago but they kept them until recently. Their non-WM online businesses have not been successful and it's about the identification with WM. Bonobos and others lost business. Moosejaw, in particular, lost suppliers---a lot of privately owned outdoor companies aren't interested in being associated with WM and some, like Patagonia, generate a lot of traffic and revenue. Their strategy now seems to be accepting the losses and looking for synergy---they've done that with the site for plus sized women's wear (a made-up name I can't remember) and they're testing it with Bonobos. Driving more upscale traffic with high end electronics and organics hasn't worked in the past, so I doubt they will drive a lot of better off traffic into the stores or even the website, but it shows that they are patient. The web businesses ultimately can be folded into WM.com even if they are shells of their former selves---the original execs have left which I think means no one listens to them. Sam's is more complicated and I still would not be surprised if they are investing enough in it to be able to sell it---the likely outcome would be private equity buying Sams and BJs.
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Re: Sam's Club to focus Member's Mark on sustainability

Post by Bakeragr »

I live in deep Walmart territory here in central Missouri, but the Sam's in Jefferson City, MO was just remodeled and I think it's only about 7-8 years old. I've heard it has exceeded expectations and honestly is set up and run better than other Sam's locations I've been to. It seems like the local managers have the latitude to customize their store selection. My complaint about our location is that the beer and liquor selection seems to be curated by someone who either doesn't drink or only likes Michelob Ultra! They don't have the curated wine selection like a Costco or even other Sam's locations. It's okay though, the store is clean and the Scan and Go has really improved, checkout is quick.
I have yet to check out the new Costco in Springfield, and it's been a few years since I've been in a Costco, but I really think Sam's has closed the gap with Member's Mark vs. Kirkland Signature.
To be honest though, if I can buy it at Sam's and skip the trip to Walmart, I'm going to do it. They may be cannibalizing themselves to a point.
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Re: Sam's Club to focus Member's Mark on sustainability

Post by ClownLoach »

buckguy wrote: May 18th, 2022, 4:43 am The people I know with more than one store membership seem to own small businesses which enable them to cherry pick strengths. Or else they keep forgetting to cancel the one they rarely use.

If they're using promotions to generate traffic, that's just going to attract cherry pickers given the kind of business that they are in. Walmart seems to hold on to its weaker businesses for a long time. I expected they would have left their marginal foreign markets long ago but they kept them until recently. Their non-WM online businesses have not been successful and it's about the identification with WM. Bonobos and others lost business. Moosejaw, in particular, lost suppliers---a lot of privately owned outdoor companies aren't interested in being associated with WM and some, like Patagonia, generate a lot of traffic and revenue. Their strategy now seems to be accepting the losses and looking for synergy---they've done that with the site for plus sized women's wear (a made-up name I can't remember) and they're testing it with Bonobos. Driving more upscale traffic with high end electronics and organics hasn't worked in the past, so I doubt they will drive a lot of better off traffic into the stores or even the website, but it shows that they are patient. The web businesses ultimately can be folded into WM.com even if they are shells of their former selves---the original execs have left which I think means no one listens to them. Sam's is more complicated and I still would not be surprised if they are investing enough in it to be able to sell it---the likely outcome would be private equity buying Sams and BJs.
I think the online acquisition strategy is completely done. It came from the guy who came over in the Jet.com acquisition which is now largely regarded as a failure and Walmart is trying to get out of that. They're still trying to unload those fashion brands they acquired and I'm pretty sure they are going for pennies on the dollar of what they paid.

Sam's is doing a better job of adding gas stations but still doesn't have them at every location, and when they do it is a small facility with 8 to 16 pumps tops and no diesel. I don't think they want to deal with the crowds and chaos Costco intentionally takes on with new stations with up to 32 pumps or more and has added diesel to most stations. They will even build a gas station across the street or around the corner if there isn't enough space on site. So the statement that Sam's +10% underperformed Costco +14% may be misleading because of how much more business Costco does in gasoline purchases which are up simply because of the price situation. Also Costco usually has margins drop when gas prices go up because they will intentionally give up some profit to be lowest price in town where they can, mainly urban areas closer to refineries where transport costs are lower. There is a point in SoCal where Costco increases the price 30 cents if you cross the line and sales tax is actually 1% lower - in OC when you go east of the 55 Freeway the prices go up except mysteriously in Yorba Linda off the 91. I think Sam's wants the gas simply as a convenience for their members and especially that member who carries both their card and Costco because the absence of a gas station might sway them towards the club that has one.

At this point I have to think Sam's is performing so well that Walmart would not want to touch it because it is helping the overall company numbers. As long as the Sam's business is comping higher than the Walmart business - and they don't believe one is cannibalizing the other - then they will hold on to it. Plus there may be additional cost savings we don't understand behind the scenes from the combined purchasing power in the organization - remember they still are using the same DCs for Sam's and Walmart which would lead me to believe that anything that is a SKU that goes to both stores is purchased at a higher economy of scale. At the Sam's location it might stay in the "flat" or "pack" while the same is a breakpack at the Walmart location. I think the real challenge is the Real Estate piece since it is so obvious that Sam's is going after non Walmart customers - but there are still many Sam's on the same Walmart owned lot. How many of those Sam's would perform better relocated away from the Walmart - and how much would that hurt the Walmart store next door to have that large vacancy? Starts to make you wonder if they have situations where they know they are actually holding back a Sam's location to salvage a Walmart where they are at risk of losing both in the same property...
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Re: Sam's Club to focus Member's Mark on sustainability

Post by storewanderer »

Sams seems to be doing a race below the bottom on gas pricing. Reno Sams today had gas at 5.35. Costco Reno and Costco Sparks both had to come down and match that price so they went to 5.35 too. Most stations are in the 5.79-5.89 range around town (the Smiths, Maverik, Arco, etc. group). The Chevron/Shell group mostly at 5.99+.

How do I put into perspective how below market this price is?

Reno/Sparks are in a county with a special indexed gas tax to fund road projects. This tax is currently around $0.43 per gallon.

Carson City Costco, typically the lowest gas price in the region, and not part of the special indexed gas tax, is currently selling gas at $5.29. There in Carson City, most others are in the 5.49-5.69 price range.

So typically when looking at Costco there is a spread of about .40 per gallon between Reno/Sparks and Carson City, solely for that indexed gas tax difference. Now a six cent spread. I have never seen it so low.
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Re: Sam's Club to focus Member's Mark on sustainability

Post by Alpha8472 »

Maybe Sam's Club transports gas in from a cheaper state?

The Costco that I passed by today in San Leandro, California had gas at $5.69 a gallon. It was the same price at Valero.

Cheap gas draws in customers from others stores. Sam's Club is willing to make less on gas just to draw in more customers. Right now you can get a membership deal online for $45 and get $45 added to your account to spend at the register in the next 60 days. It takes about 72 hours for it to load. It is like getting a membership for free.
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Re: Sam's Club to focus Member's Mark on sustainability

Post by storewanderer »

Alpha8472 wrote: July 4th, 2022, 12:46 am Maybe Sam's Club transports gas in from a cheaper state?

The Costco that I passed by today in San Leandro, California had gas at $5.69 a gallon. It was the same price at Valero.

Cheap gas draws in customers from others stores. Sam's Club is willing to make less on gas just to draw in more customers. Right now you can get a membership deal online for $45 and get $45 added to your account to spend at the register in the next 60 days. It takes about 72 hours for it to load. It is like getting a membership for free.
Always a ~.40 spread between Reno Sam's and that Carson City Costco... due to the tax difference.

Reno Sam's recently removed the Wal Mart signs from the gas station and closed its gas station to non-members, unless- you have a Wal Mart Shopping Card or you are a Wal Mart Plus member. Then somehow you can still go there and fuel. This happened in the past month or so. There was no notice given about it. No signs are posted. Many people pull up and insert their credit card and it will actually accept it in the pump then it will decline it due to no membership card provided or some such error. Previously, it would go ahead and authorize your card then ask you if you are a Sam's Member yes/no and if yes then prompt to insert card and give you .05 off, if no then it would just charge you at the posted price. Also I think Wal Mart Pay users may be able to go there and fuel (not positive on that). This was due to complaints from Sam's Club members that the lines at the station were too long/too slow (these people complaining evidently had never been to Costco).

The Sam's Station rarely has lines at all and if they have lines it is only a car or two. Costco routinely has lines 5-6 cars deep.
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