Sam’s Tests Home Delivery of Groceries
Sam’s Club is looking to expand a test of home and small business deliveries by adding shelf-stable foods and grocery non-foods, according to the Financial Times.
The warehouse club operator is using a parcel service similar to what Amazon.com has done with its primary grocery products service. The online giant has recently begun testing a local delivery service in the Seattle-area that includes fresh, frozen and refrigerated items in addition to non-perishables.
Sam’s currently has between 750 and 1,000 items in its home delivery inventory compared to 22,000 offered by Amazon.com. Other services such as Peapod, which include perishables, also offer a greater selection than Sam’s.
As would be expected, Sam’s has positioned itself as a low price leader even in the home delivery arena. The company’s prices are said to average about five percent below Amazon. Amazon boasts that its prices, at least for bulk purchases, are lower than most traditional grocers.
Discussion Questions: What do you make of Sam’s testing a grocery home delivery service? Should we expect the same from Wal-Mart? What does this say about the perceived home delivery opportunity in the grocery channel?
Sam’s needs more oomph! Perhaps they believe grocery home delivery will give it them, but doubt rises on this horizon.
And this question arises in my brain: Since Costco runs a better operation than Sam’s in their main chosen arena, what makes Sam’s testing the entry of home delivery look promising? Just consider Sam’s customer base. They may not want a service-added cost for delivered groceries. Bottom line: I’m a doubter.
I understand the concept of delivery to home and small businesses consistent with Staples and other small business focused retailers. I do not understand why Sam’s thinks Amazon is their benchmark in this area and why they would take their eye off the ball of their core customer.
I can see the concept being a weapon for their neighborhood format, but as Wal-Mart tries to be all things to all people, they tend to flounder in being great at any of them.
They have can bring bare boned costs on commodity items and categories better than anyone. There is no need for them to straddle all offerings. Costco, Trader Joe, Stew Leonard…all do a great job and are best in class on providing not only full stop shopping, but also a great shopping experience.
Bad idea for Sam’s as there is no way they can deliver for the same cost structure as they have in place now. Also when you implement the delivery concept for club stores you take out the “treasure hunt” aura that have been at the core of the club store shopping experience. The bottom-line impact of the “treasure hunt” concept is huge and Sam’s can’t lose sight of it for both their business and personal shoppers.
I can’t blame Sam’s for trying it, as they need to do whatever they can to try and catch Costco but in the end it’s not a tactic I see working for them.
It’s not the stuff, it’s the service that counts here.
When it offers home and office deliveries, Sam’s Club is entering into the “pantry management” service business. That requires a shift in orientation from item-sales-centricity to customer-solution-centricity that I’m not certain it fully appreciates.
Online ordering and delivery of part of my needs part of the time is by definition only a partial solution. It doesn’t help simplify my life in a very meaningful way. We can possibly justify this business based on a share of wallet analysis, but the real win will come when Sam’s (or Costco or Amazon for that matter) provides shoppers with a service bundle that makes running a household easier by simplifying and shortening the chore of maintaining the pantry.
It’s not online shopping. It’s in-home service. Capiche?
Being based in Bentonville, I have the luxury of visiting one of Sam’s best and brightest prototypes regularly (and no access to Costco), so my view may be skewed. If you ever told me that I would go to Sam’s just to buy tomatoes and bags of fresh organic spinach…. Sign me up as the first customer and mega-dittos on the comments regarding huge quantity hauling fatigue. As a business owner and a gal who knows how to pick and choose in the super-sized product world, having this concept “happen” would put a few extra hours in my month.
For those consumers and small businesses who want convenience and low prices, Sam’s Club delivery could have growing appeal. Eliminating long checkout lines, especially during the holidays, and providing delivery instead could be a plus, too.
But offering a very limited selection may be the stumbling block here.
Online grocery orders? Hasn’t this been done before? And wasn’t it like watching the Hindenburg? Oh, the humanity! Give it up people. Customers like to feel the oranges and eggplant before they buy. With the direction grocery chains are taking, shopping is slowly becoming fun again. Sam’s needs to focus on the bricks and not what’s in cyberspace. Online shopping is a value added service for chains with stores. Online grocery has yet to be perfected and delivering a quality service with grocery type items is difficult because of logistics. A better idea would be to add some business related grocery products to their home and office delivery program. I wonder how many times someone will try online grocery and fail. Nothing can replace the hands and eyes on shopping that a grocery outlet can provide.
Home and small business delivery might work for Sam’s with special occasions such as party planning, small business events, and personal events that need trays of prepared foods, accessories, etc. I believe that most small businesses would gladly pay a small, reasonable fee for the delivery, and still appreciate the cost savings, separately from the delivery fee. That approach might work for many customers and yet still afford the cost model to work.
As Dr. Johnson once said, in a different context, this effort by Sam’s is the ‘triumph of hope over experience’.
I think Sam’s is far from having the ability to deliver a grocery delivery business, excuse the pun.
The only benefit for Sam’s to do this is to upsell the rest of their offering to clients who need groceries delivered. Without adding in other high ticket items, they’ll never be able to offset the delivery cost.
As for Wal-Mart, I don’t see them getting into the delivery business any time soon. Their silver bullet is getting the client into the store and executing on the plan of getting them to fill the cart that was so kindly forced into their hands by the greeter.
Excellent idea, and there certainly will be more to come.
Think of any mundane shopping activity and then think “just bring it to my house please”…this should be the mantra for retailers going forward: make the experience interesting and if you can’t, just ship it.
Mr. Levy has it about right. Also, their website is, well, in word, awful. They should focus–as most food retailers should–on the web as being like doors. If they did, they might just swing them a bit more.
This is an interesting debate. I think it depends on the demographics that Sam’s is going after. The small business owner and the mother of many who doesn’t have time between soccer, ballet, karate, etc. will definitely be interested and respond to the demand. The plan must be executed well because mishaps on service and delivery will not be tolerated and will end the experience. No second chances! It’s about convenience and the fact that most consumers have stockpiled their lives with activities for every minute and if there is a way to get things accomplished to squeeze one more activity in their everyday lives, they will.
There is also the “lazy” factor! Have you ever been in Sam’s and seen the frustrated people pulling the two flat carts loaded with merchandise? How much would they pay to prevent that trauma of loading, unloading, etc, and have everything easily delivered to their door?
Haven’t we seen this concept for small business before? Wasn’t it called the local grocery distributor? People liked it then and they will like it again–especially the true small business customer Sam’s is targeting.
But here’s a question. How much of that small business customer’s personal household shopping is also done while in the Club? And will they plan and order those goods for delivery at the same time they do the business order? Or will those purchases (both planned and “treasure hunt”) go somewhere else now?
As some have already pointed out, there is an opportunity to service small businesses, personal gatherings, etc with the online grocery value proposition. Other than that, I have to agree with most that I just don’t see this strategy as “built to last.”
As we have seen time and time again, certain types of merchandise can only comfortably be purchased after a visual and tactile inspection. Grapes, mangoes, watermelons…. they all differ in quality from one sample to another.
Even with some hardgoods items, I still like to go to the store first to touch and see. Sam’s is bold to try, but I just don’t see what makes this different from the rest of the trials.
This is a tough one to pull off without affecting cost significantly. I’m with Susan and David’s POV and I wonder if they have considered a delivery charge?
We can’t offer a solid opinion on whether this will or will not be appealing to people because, like all else, it simply depends on the person. As a consistently time strapped person, time is money and delivery fees are just peachy with me. To get this service, I would have no issues giving up the tactile experience and would happily give Sam’s more business if it means not having to take an hour out of my day for the ‘warehouse trek’. However, a limited selection isn’t going to help me (as James says) ‘simplify my life’, which this whole thing should be about…from the message to the experience. It will be interesting to see how successful they are at pulling it off!
All warehouse club stores survive on minimal labor costs. Home delivery raises costs big time. Once those costs have to be covered, what’s the Sam’s Club edge? And if Sam’s Club can make money delivering a 1,000 SKU assortment, how will they avoid ruinous competition?