The Sam’s Club membership warehouse division of Walmart Inc. today announced a plan to offer free delivery for its premium Plus members for 95% of the items sold through SamsClub.com, including its Member’s Mark private label offerings, with no minimum order requirements.
The move is seen by many as a way to help Sam’s Club — and Walmart as a whole — better compete against Amazon.com, as well as peer competitors Costco and BJ’s Wholesale Club.
“We are creating a new Sam’s Club for our members. We’re adding more value to our membership, making strategic choices and changing how we work to drive sustainable growth,” John Furner, president and CEO said yesterday at a press conference at the company’s Bentonville, Ark., headquarters.
“This transformation is about accelerating our growth in digital and our growth in online shopping,” Furner said. “With free shipping for Plus, we are more aggressive on direct-to-home eCommerce than we’ve ever been. Another piece of that strategy is building out a Sam’s Club unique eCommerce supply chain that enables us to get closer to our members and makes ordering on SamsClub.com easier and faster.”
He added that the first e-commerce fulfillment center will be in Memphis, and up and running by the end of March. Others are planned for Texas, central Florida, mid-Atlantic, Chicagoland, Southern California and the Northeast, with specific locations to be announced in the upcoming weeks.
“We do see new jobs being created with the openings of these fulfillment centers,” Furner said. “Our first location in Memphis will be in a location where we had operated a Club. It is around 5 miles from FedEx Field, so it is a great spot for us to be able to ship from fast and efficiently.”
Furner noted that Sam’s Club’s typical customer is a single or dual income, busy family that lives in the suburbs and makes between $75,000 and $125,000 per year. Many of them own small businesses, such as restaurants or offices.
“This offer of free delivery is great news for our Plus members as this is a benefit that they’ve been asking for,” said Jamie Iannone, CEO of SamsClub.com and executive VP of membership and technology at Walmart. “Our Plus members continue to receive many other benefits, including Cash Rewards where they get money back for spending at the club, early shopping hours and pharmacy and optical discounts.”
When asked by Supermarket News if there will be a charge for expedited next-day delivery, Iannone replied, “On the vast majority of our items you can actually pay if you want it on an expedited basis, like next day. In general, we are optimizing our network and part of why we are making the changes with our warehouses is to get the items closer to our members to speed up the shipping. This new network is built on where our members are and how we can get items to them in one or two days.”
“This is going to be the biggest transformation in Sam’s Club 35-year history,” said Burt P. Flickinger, III, managing director at Strategic Resource Group, New York. “In addition to transforming Sam’s Club from slightly profitable to tremendously profitable, this is also providing the foundation for Walmart for delivery and fulfillment for some of their stores.
“This will be the blueprint that will also serve as a much more efficient and effective delivery model for Walmart.com and Jet.com through Walmart Supercenters, Neighborhood Markets and Division 1 discount stores. Delivery will be clustered through Sam’s Club and Sam’s Plus members first, and then spread out by clusters,” he said.
Flickinger expects the move to give Walmart up to a five-year head start over Amazon’s desire to use Whole Foods stores as distribution points for its merchandise. “This will give Walmart Inc. a chance to start to eclipse Amazon in 2018 through 2023 to 2025,” he said.
Sam’s Club is also simplifying its membership structure to two levels — a Club level for $45 per year and the $100 Plus membership. The Club membership consolidates the former Sam’s Savings and Business Savings memberships. Walmart says its membership fees are the lowest in the warehouse club channel.
“This is all part of reducing our complexity in the business and being clear on who we’re serving,” Iannone said. “It will be easier for our members, easier for our associates working in the club, and the best part of this is that our fees are staying the same. Additionally, any member will now be able to give a Club level membership to friends, family or employees as an add-on to their own membership for the new lower fee of $40. This is a very popular benefit, especially for our members with small businesses, and we’re excited to be able to lower the fee for them.”
Iannone noted that for the last year and a half Sam’s Club has offered Scan and Go technology where shoppers can scan an item with their phone, pay for it from the app and walk out the door with a digital receipt. “At Sam’s Club we want to have the easiest, most user-friendly shopper experience in the club channel,” he said.
The Club Pickup Service has also “proven to be a hit with members” Iannone said, adding that Sam’s is targeting to get wait times down to five minutes. “We now have it that you can order up to midnight and pick it up as early as 7 a.m. the next day, extending the convenience for our members even further.”
Furner noted that Walmart’s third-quarter results showed that the redirected efforts at Sam’s Club are gaining traction. Same store sales, excluding fuel, were up 2.8% for the quarter, he said.