Sam’s Looks Beyond Small Biz Customers

Discussion
Jul 18, 2008

By George Anderson

Sam’s Club, it is well known, has built its very substantial business by catering to the needs of many much smaller businesses. It’s primary competitor, Costco, has built its reputation by satisfying the desires, both mundane and extravagant, of individual consumers. The stark portrayal of the two chains, one business-focused and the other with a consumer bent, is both overly simplistic and inaccurate. Sam’s, for example, will generate a little less than half of its revenues this year from non-business members.

There is truth, however, that Sam’s has sought for some time to be seen as
more individual-friendly without turning its back on its core small business
customers. The April 2006 RetailWire discussion,
Sam’s Wants a Piece of Costco’s Pie, looked at how the Walmart-owned chain
was seeking to grab consumer market share from its rival in both “affordable” and “unaffordable
luxuries.”

With that in mind, it’s interesting to see that the new (old) news is that Sam’s is continuing to look for ways to attract more individual members to its clubs. One of the current draws, according to an article on the Meat & Deli Retailer website, is the club’s expanding selection of prepared foods and heat-and-eat dishes.

“People are time starved, but they still want tasty and nutritious food at home,” said Shawn Baldwin, Sam’s Club vice president of fresh merchandising. “The key is to provide items that are fast to prepare and high quality.”

According to the Meat & Deli Retailer report, Sam’s recently launched a home meal replacement program in 200 clubs with plans to add another 100. Among the items on the “menu” are hot rotisserie chickens at $4.97 for a three-pound bird, Angus sirloin burger with garlic mashed potatoes, chicken Alfredo with penne pasta, and tequila-flavored turkey mignon. The club also recently upgraded the quality and selection of deli meats with its own Castlewood brand.

“The key is stick to quality, while also balancing value,” said Mr. Baldwin. “It is a way to differentiate ourselves.”

Bill Bishop, chairman of Willard Bishop and a RetailWire BrainTrust panelist, said, “Sam’s Club offers a great value and is causing some supermarkets to put more emphasis on family size packages. But more importantly, Sam’s Club is getting shoppers who are going to make a large purchase to first think about visiting its locations.”

Discussion Questions: Has Sam’s broken through the image that it is a small business store and not “right’ for individual consumers? Conversely, has Costco established its small business credentials? Can the warehouse chains serve small business customers and individual consumers without coming across as being unfocused by their own club members?

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8 Comments on "Sam’s Looks Beyond Small Biz Customers"


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Mark Burr
Guest
13 years 10 months ago

It’s that same old story; one retailer wants to be to a particular customer what they are not. Perception wins. The premise to the argument is that you can convince a Costco customer to trade down to Sam’s. A visit to each site will convince you that this won’t happen. I’d rather be in Costco’s position to the extent that it’s easier–always–to bring a customer up, rather than trade down.

Retailers consistently make the mistake over and over and over again when they don’t understand who they are and their customer. This is simply the same argument made over and over again about the differentiation between Target and Walmart.

Trying to get a ‘different’ customer is much more difficult than trying to get your current customer and sell them more. Although, if it really was that simple, what would we have to talk about?

Rick Moss
Guest
13 years 10 months ago

To a good extent, the sight of small business people loading flatbed carts with cases of product has a positive effect on regular consumers. They think, “Hey…if this deli owner stocks up here, these prices must be good!” In other words, it makes consumers feel like they’re “part of the club.”

So, despite some obvious challenges, I’m not seeing fundamental cross-purposes in attempting to cater to both segments. It’s all part of the allure of the deal that members crave.

Kai Clarke
Guest
13 years 10 months ago

There is no question that Sam’s is pursuing and achieving the same customer as Costco. The same can be said for Costco. Walking into either one of these stores makes it difficult for a customer to determine which retailer it is. This is better for Sam’s, since they are truly much smaller than Costco, and have not achieved the same success. Appealing to both the club consumer and the small business customer is the smart goal for both of these customers. Sam’s has been doing this for years. The electronics section is focused on consumers, as is their grocery section, which sports mostly 1-2 packs not 5-10 packs of food.

David Livingston
Guest
13 years 10 months ago
Both Sam’s and Costco are primarily focused on the consumer. Its just Costco does a little better with the consumer and Sam’s does a little better with small businesses. Sam’s will have difficulty in going after the Costco shopper. Costco is much more picky when it comes to hiring. Costco goes after a higher quality employee and offers better pay. Sam’s is more interested in the less than ordinary employee who will have a shorter tenure. Sam’s will never be Costco just as Wal-Mart will never be Wegmans. Comparing Costco’s sales per unit compared to Sam’s Club, I don’t think Costco wants to sacrifice its high perception with the individual consumer in order to cater to small businesses. Sam’s simply doesn’t have the employee talent to improve their image with the individual consumer. I went to Costco recently and was greeted by an enthusiastic, young good looking employee. Then I went to Sam’s and was greeted by an elderly lady sitting in a chair on oxygen. Do the math.
Ian Straus
Guest
Ian Straus
13 years 10 months ago

Sam’s Club has pursued individuals for years, beginning with groups such as government employees and then widening this scope.

As an item of proof, take my wife and myself. We joined Sam’s club about the time we got married, 17 years ago. We have never been a “small business” (whatever that means, since the SBA’s definition includes some pretty large businesses), though technically I did briefly work on contract.

As a second item of proof, look at Sam’s jewelry counter! One could argue that their furniture and bedding aisles might serve small proprietors of motels, but how do you account for diamond sales except as sales to individuals?

Ryan Mathews
Guest
13 years 10 months ago

Costco seems to be the more “traditional retail”-oriented of the two clubs. It will be hard (and perhaps ill-advised) for Sam’s to try to be more individually focused. The irony, of course, is that both companies serve both masters.

Mark Lilien
Guest
13 years 10 months ago

Burger King and McDonald’s are different, but most folks wouldn’t drive 15 minutes out of their way to reach their favorite. Same with Costco and Sam’s Club. Lots of retailers can’t pass the 15 minute test.

John Crossman
Guest
John Crossman
13 years 9 months ago

As a general observation, both of them need to do a much better job reaching out to active adults. For many Baby Boomers who are retiring, Costco and Sam’s are two of their favorite retailers and yet those consumers don’t seem to be on the radar screen of either retailer.

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