John Furner didn't wait for analysts and investors gathered at Wal-Mart Stores Inc.'s home office in Bentonville last Tuesday to ask the Sam's Club question.
Instead, the division's new chief executive officer quickly tackled the topic on his own.
"Will the new team at Sam's Club move the needle in a meaningful way?" Furner said, acknowledging that the company's trajectory had been relatively flat for years. "The answer is, 'Yes.' We will move the needle and we're going to accelerate growth at Sam's Club in a meaningful way."
Furner, who replaced Rosalind Brewer as Sam's Club's CEO on Feb. 1, provided an update on his plans for the warehouse business during Wal-Mart's annual meeting with the investment community last week. He has been handed the task of reinvigorating a business that has recorded six straight quarters of positive same-store sales growth but continues to be outpaced by rival Costco.
So Furner said Sam's Club has been busy implementing strategies to accelerate growth and unveiled one of the company's biggest shifts during the meeting. Sam's Club has narrowed the scope of its target customer to focus more on budget-conscious shoppers than business members.
"Over the years, we've had at Sam's Club a number of strategic shifts," Furner said. "We try to serve a wide variety of incomes, some of which was driven by real estate locations. And we've attempted to serve too many types of small-business members. At one point we had 16 different member segments. ... We weren't serving any of the segments very well."
Overall, Sam's Club categorizes its customers in two groups: savings members and business members. Citing internal data, Furner said 74 percent of its customers are savings members and 95 percent of member purchases -- excluding fuel and tobacco -- are actually for household items.
So the data show that Sam's Club really has "one member," according to Furner. He defined them as busy families of four or more people who earn between $75,000 and $125,000 annually. They may own a small businesses as well, but most of their purchases are specifically for their homes.
Not only does the group account for the largest segment of the business, it also represents the highest percentage of traffic growth and online sales, according to Furner.
While Sam's Club will maintain strong relationships with businesses like restaurants and small offices, Furner said the strategy is to align the entire business around the more narrow focus.
"We're evaluating everything from our membership offering to our merchandise categories to our locations, and we've got some important choices to make in the future," Furner said.
Brian Yarbrough, a retail analyst for Edward Jones, said the shift makes sense for Sam's Club as it tries to take a more sizable step. While net sales were up 2.6 percent in the first half of the fiscal year and traffic has increased 1.6 percent, Yarbrough said Sam's Club must find a way to better compete with Costco.
"They were probably too deep in trying to be too many things to too many people," Yarbrough said. "They need to be more laser focused. It seems like they're making some headway there."
Carol Spieckerman, a retail consultant and president of Bentonville-based Spieckerman Retail, also said Sam's Club has been "a bit scattered" in its approaches. She believes the new focus -- adjusting its attention away from business customers in favor of budget-conscious shoppers -- represents "a pretty radical shift" for the company.
"That's not to say it doesn't make sense in the long run," Spieckerman said. "The trick will be to ensure that business members still feel some love, even as Sam's puts a bull's-eye on the bargain hunters. No doubt plenty of members fall into both categories."
Furner outlined several other areas of improvement at Sam's Club, including the growth of its private brands. Two years ago, private brands -- which are designed to differentiate a retailer from competitors and create loyalty -- accounted for 17 percent of sales and is now at 23 percent. The company's Member's Mark brand is now an $11 billion business.
The company is investing more in its perishables business as well, establishing training programs that develop what Furner described as "fresh experts." E-commerce sales also are up by 27 percent in the first half of the year and, like its parent company Wal-Mart, Sam's Club will continue to invest in technology and innovation intended to make shopping easier.
Furner outlined one of the company's latest examples. Sam's Club will launch a new membership sign-up process later this year that promises to significantly trim the amount of time it takes to get a card and start shopping in the club. The current method takes anywhere between 8 and 28 minutes, while the new system can be completed in 40 seconds.
"We've got a clear vision for where we're going, and we're making progress," Furner said.
SundayMonday Business on 10/15/2017