The warehouse division of Walmart Inc. is adding a perk for its premium members -- free shipping on nearly every item available on its website.
Sam's Club CEO John Furner announced the new offering for "Plus members" during a conference call with reporters Tuesday. In addition to the free shipping, Furner and Samsclub.com President Jamie Iannone said the club chain is also trimming membership types to simplify the options for shoppers.
The changes come as the company continues to transform the business, attract more members and increase sales as it competes with rival Costco.
"We are creating a new Sam's Club for our members," Furner said. "We're adding more value to our membership, we're making strategic choices and we're changing how we work to drive sustainable growth."
Sam's Club's Plus members, who pay an annual fee of $100, will receive free shipping on more than 95 percent of the items available on Samsclub.com under the new plan. The offer does not require a minimum purchase, and the available items include nearly every product under the company's Member's Mark private label brand.
Plus memberships with Sam's Club already include perks like early shopping hours, cash rewards of $10 for every $500 spent, and pharmacy and optical discounts.
The company previously had two other types of memberships in addition to the premium level -- Sam's business and Sam's savings -- with a $45 annual fee. Iannone said Sam's has decided to consolidate those two into one group -- Club members -- to reduce complexity. The company will now have just two types of membership -- Plus and Club members.
"We went back and looked at our membership structure to make sure it was right for our members and our business," Iannone said. "After that review, we decided that part of our transformation had to be to simplify our membership offerings."
The moves announced Tuesday continue Furner's plans to transform the warehouse business, which has typically been behind Costco's sales growth in the club segment.
Furner said last year that the company had decided to sharpen its focus and began catering to budget-conscious shoppers, pulling back from business owners. He defined those target customers as homeowners who earn between $75,000 and $125,000 annually and typically live in the suburbs. Some of those target customers own businesses and order products for their restaurants and stores.
Other initiatives have been geared toward that core customer as well, and Furner believes the efforts are gaining traction after Sam's Club reported a net sales increase of 4.4 percent during the third quarter of the fiscal year that ended Jan. 26, while same-store sales increased for the seventh-straight quarter.
"We've taken the last year to make sure we are making really clear, deliberate choices in a way that adds value for that core consumer," Furner said.
Brian Yarbrough, a retail analyst with Edward Jones, said narrowing its focus makes sense as Sam's Club tries to increase sales growth and keep pace with Costco. But he also believes Sam's must strike a "delicate balance" because it doesn't want to walk away from business members too much.
"They were trying to be too many things to too many people and they felt like that was hurting a little bit, so they're really trying to simplify this down and get it down to their core base and offer them great deals, and it can drive longer-term growth," Yarbrough said. "Whether it works or not, your guess is as good as mine. But it definitely seems like they're really trying to simplify the entire thing to make it more convenient for consumers."
The free-shipping announcement comes about a month after Sam's Club revealed that it was closing 63 clubs -- or about 10 percent of its stores -- across the U.S. Many of those closings were in areas where the population hadn't grown as expected. Some of the closed stores will be converted into e-commerce warehouses.
Sam's Club has said the first store to be converted into an e-commerce center is in Memphis. Furner said Tuesday that the center should be ready to ship items by the end of March.
The Memphis center will be instructive for Sam's Club as it builds out an e-commerce supply chain to new areas, according to the company. Other regions being considered for e-commerce centers include Texas, central Florida, Chicago, Southern California, the mid-Atlantic and the Northeast.
"With free shipping for Plus [members], we're more aggressive on direct to home e-commerce than we've ever been," Furner said. "Another piece of that strategy is building out a Sam's Club unique supply chain that enables us to get closer to members, and it makes ordering on SamsClub.com easier and faster."
Business on 02/14/2018
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