E-commerce key to Sam’s Club’s aggressive growth plan

Sam’s Club announced plans earlier this year to double in size over the next eight to 10 years, which would put annual revenue at around $180 billion. The Walmart division is counting on e-commerce for much of that growth.

It has taken Sam’s Club 42 years to grow revenue to $90 billion annually, but CEO Chris Nicholas said much of the country is underserved by the club segment. Specifically, Sam’s Club, but that is changing.

Nicholas, speaking at Barclays Annual Global Consumer Staples Conference in Boston on Sept. 4, said there’s a reason the club channel is outperforming retail as a whole.

“I think value is resonating really well,” he said. “It doesn’t matter what generation you are. It doesn’t matter what income cohort, it doesn’t matter where you live in the country, people really like good value, and they like great items.”

He said creating a seamless shopping experience is key to growth. He said 40% of members who shop inside clubs use the Scan & Go options, and everyone takes advantage of walkout technology that uses computer vision to scan the basket and reconcile with the receipt, eliminating the need for members to stop at the door for a manual check.

Sam’s recently opened a new club in Tempe, Ariz., giving the retailer 601 wholesale stores. There are 30 new clubs in the pipeline over the next couple of years. Tempe followed a new club in Grapevine, Texas, that opened this spring, the first new construction since 2017.

Nicholas said there are dozens of locations for a Sam’s Club in communities that want one. Walmart CEO Doug McMillon said last week at the Goldman Sachs retail conference that Sam’s Club is a big and growing business.

“I think one of the things that Chris (Nicholas) and the team have done is to embrace the total company in a way that’s additive to the business, leveraging Walmart’s supply chain, technology and maintenance capabilities and leaning into the assets of the company in a way that are productive and taking all the knowledge that we have about e-commerce and applying it to Sam’s,” McMillon said.

McMillon said the brick-and-mortar opportunity with Sam’s Club is great, but when layering on e-commerce, the opportunity for growth is exponential.

“So if you looked at the components of growth for Sam’s, you end up with a walk-in traffic in-club business that grows,” McMillon said. “Layer curbside on that at a higher growth rate, and then delivery at a much higher growth rate, and you end up with an opportunity to have a business that compounds nicely.”

McMillon also is a personal fan of Sam’s Club’s e-commerce capabilities.

“I’m addicted to the fresh-squeezed orange juice and blueberries, and I need them every week,” he said. “And I’m getting that and a rotisserie chicken so that (wife) Shelley doesn’t have to make dinner on Sunday night, and other things, and all in less than an hour from Sam’s Club express delivery. And so any tax that was associated with a trip to Sam’s is just gone. … So I think we’re going to grow from an e-commerce point of view in a big way in Sam’s Club.”

Sam’s Club e-commerce sales grew 26% in the recent quarter. Two-thirds of Sam’s Club’s growth came from e-commerce, and 50% of that was delivery. Nicholas said the express delivery Sam’s offers is three hours or less. He said express delivery grew 185% with plenty of growth opportunities.

“Our e-commerce growth is something that we can hardly keep up with, even though we’re growing really fast,” Nicholas said. “And our job is to work out how we grow as fast as we can sustainably with e-commerce. People really want it. And that is whether it’s club pickup, or it’s delivered from the club, or whether it’s delivered from a fulfillment center. … We’re about 18% of our sales are e-commerce today. That’s grown rapidly. And we expect that to be 40% and then beyond 40% over the years to come.”

Sam’s Club also recently opened up more items for delivery. Nicolas said almost the entire club assortment is available for delivery including meals prepared in the club, and including pizza.

“What’s really exciting about our expanded assortment for delivery is that it caters to occasions,” he said. “People don’t just buy a pizza; they’re putting other things in their basket. The size of the basket is 10 times the value of the pizzas they’re buying, and it’s at Sam’s Club prices.”