Walmart observations

[ClownLoach]

I'm sure that they want to close another wave of stores. They haven't done a significant wave of closures in at least 4 years?

Also I wonder if they would start closing stores only to reopen as Sam's Club later? Obviously this would be in better neighborhoods. They are finishing up the chain wide remodels/refresh projects and could focus their energy on new stores again. The contrast between Walmart and Sam's has never been bigger. The PNW and San Diego could open up to some of these stores with all of the problems that will erupt if this Kroger-Albertsons merger goes through. This might be their chance to break into "Costco Country."

I wonder if they could try a format that is part Sam's Club and part Wal Mart pick up (with orders basically handled at another location and brought there). Wal Mart pick up has captured many upper middle class customers who previously did not shop at Wal Mart. One issue I am hearing lately is if there is one issue with pick up and they decide they have to enter the store for any reason (like to go to customer service, or replace a canceled item) the entire experience is ruined for them and they may not do even another pick up again. Wal Mart's in store experience is THAT bad now.

I still am not convinced they would be opposed to spinning Sam's off to private equity if they could figure out a way to get someone to pay them enough for it. Based on recent performance at Sam's, this may be the time to do that again if they really do want to be rid of Sam's...

I'm not sure we will see Sam's in the PNW again though. It would be very difficult for them to return after they left once.

I'm not sure Sam's is a drain on Walmart's resources and I'm not sure an independent Sam's would be a successful chain. A spinoff of Sam's would probably lead to either a merger with BJ's or a chainwide collapse with Costco and BJ's picking up the scraps within 5 years. Sam's is too integrated with Walmart in terms of HR, distribution, vendor purchasing, etc. that it would cost too much to make it an independent entity to make it profitable.

Sam's is far too integrated with Walmart and it benefits both for them to stay that way. DCs are a fixed asset expense for example aside from payroll; Sam's is using the same DC. If Sam's was independent they would not want to use the Walmart DC network and now they would have less utilization of the facility. Same for all of the systems, although Sam's now is the test bed for new technology for the company; if something works well then it rolls out later to Walmart. Basically they're piggybacking on most of the Walmart systems for free and probably could not afford to replace them all on their own. A better way to look at it is this - let's say that together due to the extra volume Sam's puts out with even lower payroll rate than Walmart the SG&A expense is 10%. If Sam's leaves all of the fixed costs in the SG&A are now going to be calculated off a lower amount of sales, and the rate will assuredly be higher. Basically Sam's helps give Walmart leverage for their overhead.

So a spinoff is not going to happen because of the high costs of acquiring the needed systems and facilities to be independent plus the hit to SG&A. As long as a Sam's Club store is cash flow positive and comp positive then Walmart will want it to be in the system. Really the same goes for a Walmart store. I think they have little to zero tolerance for any negative comp store unless they cannibalized it themselves (which is rare these days since they basically stopped opening new stores). And even less for a money losing store. They would rather just take the big tax write off from closing the losing store. And again since their margins aren't great at Walmart either being a low price, high volume business they have to close stores if they have high shrink.

A private equity sale for Sam's won't work, and furthermore the margins are so narrow at these warehouse stores that the debt the PE acquirer would drop onto the P&L would immediately torpedo the entire company and they would be in bankruptcy immediately. The only way these PE guys guarantee that they make money on their investments is to either borrow money and then make the acquired entity pay it back (so they're not spending their own cash and just reap the profits), or they do use their own cash and set it up as a loan later to be repaid with interest. Basically the profits aren't there for Sam's to be acquired by private equity.

So really the only way Sam's could separated from Walmart would be a sale to a competitor, if one existed who could acquire them. BJs is too regional and I believe they run much lower volume stores. Although Walmart won't break out volume I firmly believe that Sam's is a larger company than BJs because of all of the international stores. Remember Costco has one or two China stores and Sam's has dozens. Sam's also has many stores in Latin America. And Costco would not be interested in such a large merger nor would it be approved by the FTC. Amazon can't even handle Whole Foods after years of owning them and I doubt they would do any better owning Sam's although they do own a lot of infrastructure that could be converted. But they also would have to replace all the merchandise and I doubt they have the clout with vendors to get the same quality and price as Walmart does.

So as much as we all want to speculate on Sam's future, they aren't going anywhere. They will stay attached at the hip to Walmart.

But it is obvious that they are obviously growing their sales at a rapid pace; every Sam's I visit in OC and Riverside County has the same level of traffic as a Costco now. Sam's seems to be busier than Costco in the Las Vegas market too. I was in a Vegas Sam's last week that added a new full service meat counter which was very nice and another innovation for them. Despite sales growth their stores stay under control because of the innovation of Scan and Go on their app. Costco has had to adapt to this to improve their checkout by rolling out self checkout mainly to improve the capacity of their front ends and shorten the lines. In most Costco stores where self checkout was added they kept the same number of full service checkstands and added between 6 and 12 self stations. If the smaller transactions all wind up on self checkout it improves the thoroughput of the entire front end even if the customer is half the speed of the cashier; they still have netted between 3 and 6 additional lanes effectively and usually this is with 2 to 3 more cashiers to supervise. When they jump in and scan for the customer then the productivity improves more. I think Costco knew they really just needed some smaller checkstands to serve as an express lane; they tried using them decades ago and pulled them out because they didn't experience consistent usage and then all the other lanes got longer. Self checkout solved this problem.

Costco has been getting some flack for earnings and sales from Wall Street lately. I think they will say anything but blame Sam's Club for taking some sales. Anywhere that the two compete - it's obvious Sam's is taking share and comping up. Sam's is probably like the $1.50 hot dog for them; if anyone wants to bring up that topic in Issaquah they are going to be thrown through the window.

[mbz321]

Costco has had to adapt to this to improve their checkout by rolling out self checkout mainly to improve the capacity of their front ends and shorten the lines. In most Costco stores where self checkout was added they kept the same number of full service checkstands and added between 6 and 12 self stations. If the smaller transactions all wind up on self checkout it improves the thoroughput of the entire front end even if the customer is half the speed of the cashier; they still have netted between 3 and 6 additional lanes effectively and usually this is with 2 to 3 more cashiers to supervise. When they jump in and scan for the customer then the productivity improves more. I think Costco knew they really just needed some smaller checkstands to serve as an express lane; they tried using them decades ago and pulled them out because they didn't experience consistent usage and then all the other lanes got longer. Self checkout solved this problem.

As a Costco employee, 'self' checkouts are a nightmare and I have no idea why we implemented them. Although some individual locations have set an item limit, for the most part, there isn't one and leads to members coming up with huge baskets and clogging up the works for people that legit have small orders. Card sharing/item limit abuse is rampant, plus it takes away from upselling on memberships, add ons like postage stamps that we push for, etc. We've caught a few label switchers and the like. It literally goes against our entire business model and I don't know what has happened to the people in corporate. The machines themselves are so badly designed and there are no scan guns for the members to use. They don't take cash. They also don't take certificates from either the executive membership or the Citi card, activate third party gift cards or costco gift cards, nor do we have any signage specifically indicating as such, so it just leads to more frustration. While I don't find them difficult to use, many people seem to struggle with the basics on how to use the damn things, like scanning their card on the scanner to start.

They want us to pretty much scan the members carts for them when we have a few employees stationed there (mainly because like you basically said, the members are too slow to go through them, and to help reduce shrink) so yeah, they've basically turned into expensive, glorified sorta-express lanes.

As a once-in-a-blue-moon Sam's shopper, they really do it right....a terminal, and a scan gun, that's it and how it should be.

[storewanderer]

As a once-in-a-blue-moon Sam's shopper, they really do it right....a terminal, and a scan gun, that's it and how it should be.

Last time I was at Sam's, at the exit, the customer ahead of me had a flat cart with maybe 20 items on it. You probably noticed at Sam's, upon exit, the exit clerk basically scans every item you have (or so it feels like it). Anyway, this customer had used self checkout. The exit clerk was scanning items and seemed to mess up scanning something twice and the customer started to get upset and said "next time we are going to a regular cashier so they don't have to check all of our work here at the exit. Here we did all the work scanning stuff and now they are checking every thing we did." The exit clerk didn't say anything to that comment and resolved whatever issue the scanner was giving, proceeded to scan the rest of the items, and then let the customer leave.

Also Sam's self checkouts cannot sell gift cards either. Also I did a return recently at Sam's. I told them I was doing an exchange. I should have kept my mouth shut and gotten a refund to my credit card. Since I was doing an exchange, they asked if I wanted a store credit, which I accepted. They gave me a paper slip from the register that printed out, which was a gift card with a barcode and pin to go do the exchange with. That paper slip gift card could not be redeemed at self checkout, had to go to the cashier (one cashier open). However I do agree with you the implementation of self checkout at Sam's is great and their home grown system is very easy to use.

I'm not sure how Costco has gotten self checkout so wrong. I think part of the problem is Costco's front end, is just so good... the cashiers are so efficient. If you have an efficient well run front end with fast cashiers, self checkouts represent a decline in efficiency. Most retailers simply do not have the efficiency Costco has on the front end. Costco's problem is it needs more registers, more space, and more cashiers to get people through the place faster since the stores are so crowded. But at this point they probably need to figure out a way to add more registers in, not these self checkouts.

[cjd]

I noticed that Walmart is expanding its selection of US Polo Association brand. The dress shirts and polo shirts seem to be mimicking Ralph Lauren. They look pretty good but are obviously not quite the same.

I wonder if US Polo moved to Walmart with Sears mostly gone now. I remember seeing a smaller selection there, but mostly polos hoodies and t shirts.

[storewanderer]

I noticed that Walmart is expanding its selection of US Polo Association brand. The dress shirts and polo shirts seem to be mimicking Ralph Lauren. They look pretty good but are obviously not quite the same.

I wonder if US Polo moved to Walmart with Sears mostly gone now. I remember seeing a smaller selection there, but mostly polos hoodies and t shirts.

Fabric doesn't quite seem to be the same. Presentation is of course terrible. They will reduce these items to $1 during clearance, I have a number of summer items I obtained at .25 to $1 during their clearances. Excellent value at those prices.

[cjd]

Some of the Walmart store brand stuff is so cheaply made you wonder how it works, but it sells by the millions.

The Mainstays floor lamps are one example. The paint is scratched out if the box, they seem to lean to the side, and the shade is a thin plastic that bends, about the thickness of a soda plastic bottle.

But amazing they can sell these for $9 and they sell like crazy. It seems everyone’s house and every thrift store has at least one of these Walmart floor lamps.

Some of these items don’t even work. Last summer there were glass plant mister bottles sold under the Better Homes and Gardens brand and the reviews were awful. They were all returned because they didn’t actually spray or only did a couple times before breaking.

[ClownLoach]

As a once-in-a-blue-moon Sam's shopper, they really do it right....a terminal, and a scan gun, that's it and how it should be.

Last time I was at Sam's, at the exit, the customer ahead of me had a flat cart with maybe 20 items on it. You probably noticed at Sam's, upon exit, the exit clerk basically scans every item you have (or so it feels like it). Anyway, this customer had used self checkout. The exit clerk was scanning items and seemed to mess up scanning something twice and the customer started to get upset and said "next time we are going to a regular cashier so they don't have to check all of our work here at the exit. Here we did all the work scanning stuff and now they are checking every thing we did." The exit clerk didn't say anything to that comment and resolved whatever issue the scanner was giving, proceeded to scan the rest of the items, and then let the customer leave.

Also Sam's self checkouts cannot sell gift cards either. Also I did a return recently at Sam's. I told them I was doing an exchange. I should have kept my mouth shut and gotten a refund to my credit card. Since I was doing an exchange, they asked if I wanted a store credit, which I accepted. They gave me a paper slip from the register that printed out, which was a gift card with a barcode and pin to go do the exchange with. That paper slip gift card could not be redeemed at self checkout, had to go to the cashier (one cashier open). However I do agree with you the implementation of self checkout at Sam's is great and their home grown system is very easy to use.

I'm not sure how Costco has gotten self checkout so wrong. I think part of the problem is Costco's front end, is just so good... the cashiers are so efficient. If you have an efficient well run front end with fast cashiers, self checkouts represent a decline in efficiency. Most retailers simply do not have the efficiency Costco has on the front end. Costco's problem is it needs more registers, more space, and more cashiers to get people through the place faster since the stores are so crowded. But at this point they probably need to figure out a way to add more registers in, not these self checkouts.

Sam's scans 3 items per receipt. It doesn't matter if you used full service checkout, self checkout kiosk or Scan and Go app the experience is the same. If they find a problem then they scan the whole order. I did notice that Walmart has stopped doing this; a few years ago they had adopted the same Sam's Club scanning at the door which at least prevented the reuse of receipts. Now they station a person at the door who pays zero attention to what you have and just marks the receipt. I have also noticed that as of about August Costco has turned up the intensity of the door audit process - they frequently stop and manually do a full item count on big baskets and really hold up the exit process. They have suddenly become very detailed...

I have not had a problem using the store credit slips on Sam's self checkout. It accepts them once you press the payment button, pick the scanner back up on the payment screen and then scan the bar code. What is odd is that it requires an employee override to use Sam's Cash on self checkout - and warns you on the screen if you attempt to redeem it that "A Sam's Club Associate will need to see your Photo ID to redeem Sam's Cash.". I do wonder if Sam's has installed some kind of validation system on the kiosk self checkout for credit cards; I have a card that automatically is flagged by their system only on the kiosk and it will say an associate is needed to complete the transaction with some "code" below on the screen. When that happened a associate came up and logged in then told me they needed to see my card, membership and a photo ID so it was clearly some kind of validation. I can use the same card at a full serve line and in the app, but the first time I tried to use in the app it presented a barcode and told me to finish the transaction on a kiosk where I had to scan the barcode then use the actual card on the PIN pad. I think they are looking to see if the payment card name matches the membership name - because this one card shows just my first initial instead of full first name.

I honestly just don't see the speed or efficiency problems at self checkout at Costco, but admittedly customers in Southern California seem to be better at using them. The best stores have one associate per 3 registers and they do basically scan everything for every customer with the handheld going from first to second to third register then back again. They also boot customers from the line if they have alcohol or a large basket. It seems customers struggle far more with their operation when I travel, as if they were implemented much more recently in other states. I have seen many SoCal Costco stores have ordered additional hanging overhead signage to indicate the accepted pay types and no alcohol. (A store near Mission Viejo on Crown Valley rather hilariously has installed a "NO ALCOHOL PURCHASES" hanging sign that is the same size as the Self Checkout sign or larger. I have heard customers argue while standing under the sign that they just used self check last week for a case of wine and want to know when the rule changed...)

I have seen validation processes start at Costco locations where they will not allow you to enter the self checkout area unless you present your Costco card, and they also scan it with a RF device to ensure it is valid. They do allow you to just show your Costco app there without scanning. No concern for screen shots because the QR code presented changes every 30 seconds or so for security. So far I have only seen this new guarding of self check in Orange County, but clearly there is a process in Costco systems if they are scanning membership cards. I do remember that many years ago Costco was testing the scanning of member cards at the entrance of the Garden Grove store but stopped after a month or so. With modern technologies like the access control gates at Amazon Fresh I wonder if Costco will implement membership validation at entry again in the future; they could quickly use facial recognition to block card sharers right at the door.

[storewanderer]

Sam's scans 3 items per receipt. It doesn't matter if you used full service checkout, self checkout kiosk or Scan and Go app the experience is the same. If they find a problem then they scan the whole order. I did notice that Walmart has stopped doing this; a few years ago they had adopted the same Sam's Club scanning at the door which at least prevented the reuse of receipts. Now they station a person at the door who pays zero attention to what you have and just marks the receipt. I have also noticed that as of about August Costco has turned up the intensity of the door audit process - they frequently stop and manually do a full item count on big baskets and really hold up the exit process. They have suddenly become very detailed...

I have not had a problem using the store credit slips on Sam's self checkout. It accepts them once you press the payment button, pick the scanner back up on the payment screen and then scan the bar code. What is odd is that it requires an employee override to use Sam's Cash on self checkout - and warns you on the screen if you attempt to redeem it that "A Sam's Club Associate will need to see your Photo ID to redeem Sam's Cash.". I do wonder if Sam's has installed some kind of validation system on the kiosk self checkout for credit cards; I have a card that automatically is flagged by their system only on the kiosk and it will say an associate is needed to complete the transaction with some "code" below on the screen. When that happened a associate came up and logged in then told me they needed to see my card, membership and a photo ID so it was clearly some kind of validation. I can use the same card at a full serve line and in the app, but the first time I tried to use in the app it presented a barcode and told me to finish the transaction on a kiosk where I had to scan the barcode then use the actual card on the PIN pad. I think they are looking to see if the payment card name matches the membership name - because this one card shows just my first initial instead of full first name.

I have a card that only shows my first initial also so I am going to try that at Sam's Club and see what happens. You would think their system would be smarter than this as it isn't uncommon for cards to just have a first initial.

This also tells us if someone is trying to do membership sharing, Sam's Club appears to have a mechanism built into the self checkouts that would flag that from occurring by comparing the name on the membership to the name the system shows is tied to the payment card. Perhaps this is how they are able to appear so loose with regards to self checkout and protecting the integrity of their membership fee revenue. This unfortunately will also be a reason why Sam's Club could never implement Contactless payments because Contactless payments do not provide the name of the cardholder with the transaction, they just come back Valued Customer or Cardholder or similar for name.

The Reno Sam's scans far more than 3 items per transaction. I've gone up there with 4-5 item transactions and they have to scan them all. I do remember having about a 10 item transaction and they only scanned a few items. Maybe the number of items they scan varies depending on transaction size.

There is basically one Wal Mart in Reno that attempts to check receipts of all customers and only in the daytime (which I laugh at, because I'd expect most issues are at night). The other Wal Marts, if they have someone at the door, which isn't always, will only ask for a receipt for unbagged merchandise. They do not mark the receipt, they just look at it then hand it back to you.

[cjd]

My Walmart checks the receipts if not in bags, otherwise they waive you through. Awhile back I was buying a large boxed item that wouldn’t fit in a bag and stopped for a receipt check and they didn’t seem interested but kind of did a half hearted glance at it.

They primarily seem interested in checking if there’s a big ticket item like a television set, or carts of unbagged items.

Last time I went there was a couple that had bought a tall plastic clothes hamper and packed their purchases in it and the checker was looking through everything.

[Alpha8472]

How will the new reusable bag policy go? Will this increase receipt checks or make it faster?