Join The Club: Sam's Seeking Premium CE

By Brent Felgner -- TWICE, 6/5/2006

Rogers, Ark. — If Wal-Mart's moves are intended to bring it closer to “mass luxury,” the merchandising at its Sam's Club wholesale club division is directed at “affordable luxury” and then some — again, with CE playing a starring role.

Despite some missteps, which have taken years to correct, Sam's has grown to a chain of 567 clubs with just under $40 billion in sales and $1.4 billion in net profit. Sales grew 7.2 percent last year, profits 8.2 percent. Executives believe they're on the right track.

While it already enjoys a higher income demographic than Wal-Mart, the challenge at Sam's is to draw even more affluent members. Currently, more than 62 percent have annual household incomes of at least $100,000, and more than half of those pull down over $125,000, according to Doug McMillon, president/CEO of Sam's.

That's particularly important in a margin-less business, where high tickets and large volumes are a critical boost. Indeed, merchandise profit is expressed in nickels and dimes; the division's (and the channel's) real profitability is in membership fees, as it has been from its inception in the early 1980s.

Pulling better demographics involves offering great products and services to give those customers a reason to come in. To that end, executives said they are looking to add delivery and installation of large-screen flat-panel TVs in the near future.

Overall, Sam's has made good strides in CE, but a lot of work remains. While offering an array of flat-panel TVs, for example, with brands including Samsung, Dell and Sony Grand Wega, Sam's, like Wal-Mart, is still working hard to attract more prestige vendors.

“There are brands that we would like to carry which haven't determined that they want to be in the clubs yet,” McMillon said. “Some people are still hung up over the old days of channel shopping. The truth is that members with money are shopping all kinds of channels today. Some of the brand names have figured that out and they're dealing with us directly. [With] others, we do it indirectly, and there are others still that we are pursuing today to try to bring into the club.”

For the latter, McMillon said, Sam's shares its demographic data and opportunities, and believes it can bring those companies around over time.