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Wal-Mart’s Weak Link: Sam’s Club Refocuses To Close Costco Gap

Sam’s Club is strategizing to stay in the race with such rivals as Costco and its own sibling, Wal-Mart Supercenters.

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Under "Club of the Community," small business customers — traditionally Sam’s Club’s forte — will again be top priority. To keep individual consumers loyal, the company will still bring in unusual and prestigious merchandise to add a "treasure hunt" quality of the shopping experience. The company has jettisoned plans to remodel existing stores à la the Texas units.

"We do not want to do anything adding cost with prettier presentations or signs," emphasized William DuBose, who moved over from Wal-Mart a month ago to become senior vice president and general merchandise manager for Sam’s Club. "It’s not about the fixtures; it’s about the merchandise."

To that end, DuBose has mentally reclassified each department according to the type of customer it serves. Men’s and women’s apparel, fine jewelry and personal care products should be consumer-focused "treasure hunts," seeded with prestigious brands like Montblanc pens, Waterford crystal glasses and Sebastian hair care.

Office supplies, furniture and food, in contrast, will be reworked to provide the best assortment for local businesses — whether that be stocking vats of fry oil or cases of restroom-style paper towels.

In February, Scott told analysts he expected Sam’s Club’s results to improve in fiscal 2003.

In many ways, though, "Club of the Community" is less a bold new vision and more reacknowledgement of fundamental rules governing the warehouse industry. Clubs must execute on two fronts: catering to the small business owners, while keeping casual consumers engaged and paying the $35 annual fee, which adds a chunk to the bottom line. In fiscal 2000, when an accounting policy change forced it to break out the number, Sam’s Club collected $706 million in membership dues alone.

Although a smaller percentage of the overall membership, small business owners typically provide the bulk of sales volume percentage-wise.

DuBose insisted Sam’s Club can serve both constituencies while keeping within its 3,800 to 4,000 sku count.

To woo small business owners, five staffers at each club have been "refocused," DuBose said. "They know their sole purpose is to be out visiting with business owners to find out what they need." The company is touting "Gold Key" extended hours for business members only and has swapped out sku’s in key departments. In office supplies, for instance, single-line phones have been exchanged for multiline models. School supplies are out; neon "Open" signs and paper shredders capable of reducing a phone book to confetti are in.
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