February 15, 2007
Sam’s to Court Women Shoppers
Sam’s Club has always set its niche as the small business owner. That is about to change.
Greg Spragg, executive vice president of merchandising and replenishment for Sam’s Club, told an audience at Citigroup retail conference in Orlando, Fla., “We are going to have to broaden our appeal beyond small business owners. We have to be more relevant to the mom.”
According to an Associated Press report, being “more relevant to mom” and other consumers will include Sam’s upgrading its wine, electronics and jewelry departments.
The chain is looking to alter its advertising messages to keep its place with its business customers while reaching out to female shoppers. Sam’s is also working on club prototypes that the company believes will be more female friendly.
Charles Holley, executive vice president of finance and treasurer at Wal-Mart, addressed some of the changes taking place in the company’s discount store and Supercenter businesses.
The company is once again emphasizing price, but that does not mean it has given up on transforming its reputation in clothing. “We are not going to be able to change apparel overnight,” he said.
Discussion Questions: Will Sam’s small business customers remain convinced they are the club’s primary focus as it places greater emphasis on recruiting and keeping female shoppers? How will this refined positioning affect the nature of the Sam’s Club and Costco competition?
Discussion Questions
Poll
BrainTrust
Recent Discussions
More Discussions
Will an In-Store Retail Tech ‘Confidence Gap’ Create Winners and Losers?
A new survey suggests that in-store retail tech could be a major factor in retailer success…Walmart’s Next CEO Era: From McMillon to Furner
Walmart CEO Doug McMillon will soon be replaced by John Furner. What’s next for the retailer?Which Brands Are Missing the Boat on Advent Calendars?
Advent calendars appear to be trending upward in popularity, with potential to move to other holidays…
For awhile we were shopping at both Sam’s and Costco, but decided that we could very easily give up our Sam’s membership. The difference in the two stores is night and day starting with the employees. Costco treats their people right and it shows. They are friendly, helpful, fast at checkout and it is obvious they like their jobs. Costco is brighter, cleaner and much better merchandised. Costco has slightly better prices and a much better selection of merchandise. Costco’s return policy is awesome and they are so nice about having to accept any returns. When our nearest Costco opened, Sam’s were making changes trying to be more like Costco which helped but didn’t go far enough. Sam’s needs a culture change and a complete revision in their marketing if they want to compete better with Costco or else they should stay the way they are and try to increase rings with their existing customer base.
When you are number 2 you strive to be number 1. BJ’s attempted a shift to the consumer by expanding food and that did not seem to work. We heard Wal-Mart supercenters and discount stores move upscale to compete with Target. Now we are hearing Sam’s wants to shift toward consumers and away from small business. This seems more like the grass is always greener on the other side. What happens to the existing customer base? Just changing advertising will not make it happen. A complete re-merchandising and revised layout will be required. Some good old fashion market research might help. The more important question is, who is the right or best customer for Sam’s? Maybe doing a better job for the existing customer base would solve the problem rather than looking over the fence.
Who is the customer at Sam’s? Wal-Mart’s comments suggest that they are underpenetrated with women consumers vs. their core small-business customer, and there must be some basis in fact despite appearances of who’s shopping in the store. There is clearly some admission here that Costco is breathing down Sam’s neck.
At the same time, Sam’s needs to be careful not to repeat the mistakes of Wal-Mart Stores. In pushing too hard and too fast for the “fashion” customer at Target, Wal-Mart took its eye off its own core competency as the price leader. If they can clean up the in-store experience in both chains, it should be a win.
If the Sam’s Club departmental upgrades include making the wine, electronic, and jewelry areas larger, then which departments will be made smaller? And given the fact that Sam’s Club shoppers have lower incomes than Costco shoppers, how much time will Sam’s Club give itself to attract more upscale customers? How much testing will the upgrades receive before a chain rollout, assuming the testing succeeds?
This is simply not a correct statement and reflects the issues that Sam’s has with the reality vs. the perception from management. Sam’s club has been going after the family business and away from the small business focus ever since it decided to integrate food, photo and other non-business products and services in their stores. This has lowered their average basket of product pricing, their checkout “ring” and made them more successful (like Costco). Sam’s Club is trying to look, feel and appear more like Costco, who enjoys better same store sales and higher checkout rings per customer. To do this they have been changing their store architectures, product mixes, and focus (including foods and other “non-business” items) for several years. Instead this statement by Mr. Holley reflects management’s gap between reality and perception. Oh yeah, he should go into a Sam’s club and see who is shopping in their stores (women) and the basket of products they are purchasing (sales by product SKU, not dollars). It is not office supplies and computers, but instead food, furniture and clothing.
When touring stores with the President of Kroger’s Louisville KMA a few years ago, I made the comment, “Too bad we can’t sell groceries with sex, like we sell so many other things” (I worked for an ad agency at the time). He replied, “Oh, I don’t know. We romance ’em pretty good.”
And he was right. It can be done.
Appealing to women will be a chore for Sam’s. It will require a complete revamp of their mind set. Women are shoppers and most actually do compare retailers and know a bargain. For starters, Sam’s will have to start accepting all credit cards not just the Discover card. Second they will have to upgrade the ambiance in their stores (more lighting, music). Third they will have to begin marketing with specials, free access, maybe a different level of membership card.
Ask yourself why a woman would go to Sam’s unless they are operating a business? Answer this question, then get the merchandise, clean up the store, eliminate lines and provide some service and you might be able to do one tenth of the female shopper business that Costco does.
I think Sam’s is narrowing their focus too much. I read a while back that Costco did about 77% of their business with at-home consumers while doing about 23% with small business. The normal Costco does over $2 million per week. Sam’s was doing about 60% of is sales with the consumer and 40% with small business. Sam’s Clubs were averaging only a bit over $1 million per week. Seems to me Sam’s just needs to go after the consumer more and the small business less. Instead of focusing in on women I think Sam’s should regroup and focus on the consumer in general. It seems to have paid off for Costco.
Sam’s Clubs will need to really analyze what the average Woman is looking for…price in a useable packaged size, convenience and quality and can they meet those requirements in today’s business model. The average woman cannot lift the volume packs that Sam’s sells and the dual pack of oatmeal is enough to feed a family of four for three years, long after the product lapses from the expiration date. What Costco has done so well is create the experience, in a group of 50 women I talked to recently I queried them on why and where they shop. Many stop in at Costco to see what unique items they have gotten in each week. Costco has done a much better job in convenience and product diversity. These ladies didn’t want to miss the “something new” experience. Costco’s meat department puts together ready to cook gourmet meals, bakery trays, fresh fruit and vegetable trays, along with sushi, knowing that adventure, bargains and experience is what the typical woman shopper enjoys. The perception of these ladies: Costco has more items that appeal to the higher income crowd and Sam’s features more for the below average income crowd. Perception is everything! This also may be why on Wednesday’s, Sam’s has a huge number of seniors show up for the samplings of food products. They don’t buy much (because for seniors all the packs are too large for their households) but they get a full meal while visiting and recommend Sam’s to all their buddies.
My great friend and mentor, the late Paul Haker, was a database marketing pioneer and then guru who made clients rich by following a standard procedure:
Profile your current best customer as completely as possible–demographics, psychographics, buying patterns, chosen profession, lifestyle interests–then look for more people who match those attributes (or as many as you can), and market to them.
If Sam’s has done that and already found that its best customer is Mom, then they’re moving in the right direction.
If they haven’t, they’re creating more problems than they’re going to solve.