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 When it first entered the scene, Sam’s Club had a specific and focused target market: small businesses that wanted to purchase bulk quantities of products to run their operations. But the popularity of the warehouse club meant that over the years, its customers have grown far more diverse and varied. With these developments, Sam’s Club has also become a more competitive entrant in traditional discount retail and grocery markets. Unfortunately though, its competition often comes mainly at the expense of its sibling company Walmart.

Walmart still promises largely the same thing is always has, that is, low prices. Accordingly, it attracts a price-sensitive segment of shoppers who always are seeking the best deal. For a long time, these shoppers also enjoyed Sam’s Club, which enabled them to purchase large quantities at a lower price. In some cases though, Sam’s Club stocks smaller packages (e.g., a two-pack of toothpaste) that also would appear on Walmart’s shelves. Furthermore, Walmart and other large discount retailers increasingly feature larger sized packages of consumer products when they can get deals on them. Thus, the two sibling brands frequently encroach on each other’s territory.

In an effort to avoid that sort of competition, Sam’s Club is looking to revise its image. Rather than a source of cheap, bulk goods, it wants to move up the ladder to become a semi-exclusive (based on the membership fee) environment where high-end customers come to find reasonable deals on expensive items like televisions or jewelry. To achieve this shift, Sam’s Club is expanding the assortment of organic goods it carries, adding more brand name clothing labels, and dedicating a section to sheets with thread counts in the thousands.

In addition to shifting its assortment, Sam’s Club plans to leverage new technologies to identify the customers in proximity to its stores, then position those stores accordingly. For example, using ZIP code data, it learned that approximately 150 Sam’s Club stores were located in high-income areas, yet high-income shoppers were not visiting those nearby stores. Furthermore, Sam’s Club is running tests in a limited number of stores, to see how offerings such as expensive furniture, luxury clothing, and prepared meals fare.

Discussion Questions:

  1. How is Sam’s Club positioned relative to Walmart?
  2. Should Sam’s Club attempt to reposition itself? If yes, how?

 

Source: Sarah Nassauer, “Sam’s Club Aims to Be Less Like Wal-Mart,” The Wall Street Journal, August 16, 2015

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