Costco often seems like a company jogging slowly because it understands how long the race is. Competitors make bold moves, expand quickly, have a moment, and then disappear.
While that happens, the leading warehouse club adds 15-25 or so new locations each year while tweaking its operations and merchandise. Changes are never big, nor do they happen quickly.
That’s not to say Costco (COST) is complacent. The warehouse club has made bold behind-the-scenes moves when it comes to shipping and supply chain.
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In fact, it’s fair to call Costco’s management cautious but ultra-vigilant. It plods along steadily but will make adjustments as needed, and when that happens, it’s surprisingly nimble.
Its chief rival, Sam’s Club, has been less exciting until fairly recently. The Walmart-owned (WMT) brand seemed like a back-burner project for the company in recent years, but that has slowly changed.
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Now, it seems like Walmart has woken up to the possibilities at its warehouse club chain and plans massive investments there. The company won’t say that it’s trying to take down Costco, but it’s hard to imagine that the success of its rival has not motivated some of its investment plans.
Sam’s Club has used inventory robots in its warehouse clubs.
Image source: Sam’s Club
Sam’s Club shares bold new membership plan
Sam’s Club CEO Chris Nicholas shared a bold new plan for his chair during Walmart’s investor day. And, unlike many executives speaking at events like this, he actually shared a lot of specifics.
“We will redefine what the future of the club channel looks like, and that future is omni. And, we will define success by membership growth. How many new members we acquire andhow loyal they are to us,” he shared.
That’s a very clear statement that makes it clear that in the warehouse club model, sales are not as important as membership retention/
“Over the last several years, we have delivered strong growth, we have a solid foundation, and our members are telling us they want us to do more, to go faster,” he said.
Nicholas made it clear that Sam’s Club is listening.
“We’ve learned, we’ve listened, and we’ve adjusted the value proposition. We sharpened our focus, and we’ve begun the work to leverage the enterprise and move faster, all of which created the conditions for aggressive growth that increases returns for Walmart Inc. Over the next 8-10 years, we see a route to doubling our membership, and as a result, more than doubling sales and profit,” he added.
Sam’s Club bets on digital
Nicholas believes that technology will play a major role in Sam’s Club’s success both in-store and online.
“And with our omnichannel approach and the growth of our digital business, we believe we can do it even faster. As we redefine the future of the club channel, we’ve set a new bar for what members expect,” Nicholas said.
He shared some highlights:
Scan & Go is now broadly adopted, with Grapevine at around 100%. (Grapevine is the chain’s experimental store.Just Go AI computer vision exit scaled from zero to the whole fleet in less than a yearWe’re growing through digital. Our new eComm value proposition, which offers free shipping to Plus members and free pickup for Club members, has proved to be popular, and has enabled us to grow faster whilst also enhancing profitability.Personalized connected ads leveraging AI are now a reality.
The chain’s house brand will also remain a key part of its growth plan.
“Our Member’s Mark private brand represents ~50% of our merchandise sales growth in the last two years,” the CEO shared.
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Nicholas, however, thinks that online sales represent the biggest opportunity for Sam’s Club.
“And we can have a digital relationship with 100% of our members through digital membership cards. E-comm is growing aggressively. It accounts for 15% of sales excluding fuel, and we think 40% is achievable over the planning horizon. Growth in delivery with express is the tip of the spear, and it has growntriple digits,” he added.
