29 Mar Sam’s Club game plan on the right track for private brand success
In February, Walmart announced a change in leadership at Sam’s Club with the appointment of John Furner as CEO. This Walmart veteran’s path to CEO includes previous leadership roles in operations, merchandising and sourcing in addition to expatriate assignments.
The change in leadership was no surprise to the marketplace given the continuing challenge from rival Costco and the continued threat from online retailers such as Amazon. Costco continues to post strong financial performance results even with a recent sales slowdown. In addition to financial results, a recent Consumer Reports survey shows that Costco continues to outperform Sam’s Club in several key areas including product quality, customer loyalty, and customer service.
Costco’s ability to post far stronger results than Sam’s Club is linked to its relentless focus on keeping prices low and the resilience of its higher-income members resulting in a very loyal Costco member.
Mr. Furner has the critical role of leading change which is so necessary for Sam’s to win in this competitive environment.
To turn the tide, Mr. Furner plans to focus on simplifying operations and thinking differently. In public statements, he states his priorities as focusing on three key drivers:
- Digital (which I believe is to drive loyalty)
It’s all about improving the member’s experience. This focus shows recognition of shifting member behavior and adaptation by transforming the Sam’s Club experience through people, products, and digital.
Products to be the hero
Mr. Furner has said “The products we sell have to be the hero. People don’t shop our clubs for the beautiful buildings – we have concrete floors and steel racks. They come to us for great items, and we must get that right.”
What comes to mind as I interpret the “Product as a hero” strategy is:
- The products sold to members will be a main character in the Sam’s Club evolving story
- Products purchased by members have to perform ‘impressively’ and be admired by the members
- Products must make a difference in the lives of each member
The main character of this story will be Sam’s Club own brand products. Greater brand loyalty and member retention will not come from CPG brands which are available in almost every channel. Sam’s Club own brands are of growing importance in the member’s experience. To get this right, it will be important to bring in the voice of the member into the product development and brand management process.
Transforming existing member touchpoints (call centers, product ratings, etc.) into moments of capturing genuine quality feedback from members can provide highly relevant insights helping to create more products that members want.
There’s power in integration – having these separate touchpoints working together in a holistic way, to provide ‘One View’ of customer feedback gives actionable insights which can be used to increase product quality and competitiveness vs CPG brands and other retail private brands – and ultimately drive more sales.
The other opportunity here is to leverage suppliers, giving them a supporting role in the story as brand champions. Providing access to and sharing member feedback with suppliers will transform the role of the supplier, enabling them to become more responsive and action-focused and contribute their expertise to developing the product. They become an active resource in innovation, adding to the retail private brand team, increasing efficiency and reducing costs. As a main character, they can also proactively support customer engagement.
Related to digital, Mr. Furner has said: “I’m committed to accelerating our digital transformation. We saw tremendous growth last year with SamsClub.com, Club Pickup, and Scan & Go. We must continue to move with speed in this space and use member data and insights to quickly adapt and meet the needs of the increasingly digital consumer.”
Sam’s Club recognized a massive shift in member behavior and are trying to adapt by digitally transforming the club experience and company processes. The mobile app, Scan & Go, is one example. It saves members time by allowing them to bypass the in-store checkout line by using the app to self-scan products with their smartphone, pay in the app and then leave the store.
The opportunity for Sam’s Club is to take digital transformation to the next level by integrating technologies so they can be more agile, experimental and collaborative with their members. For example, streams of member information collected from the Scan & Go technology could enable Sam’s to immediately identify member and product trends. The information can be used to create a customer experience that is tailored to each individual member by providing product information and offers to create a unique experience most relevant to that member.
Here’s an existing example of integrating technology to personalize the customer experience:
McCormick and company recently launched FlavorPrint, an online flavor recommendation tool that visually represents consumers’ tastes. Consumers take a 20 question quiz about eating habits, food likes and dislikes. FlavorPrint takes this data and uses algorithms to generate personalized recipe suggestions based on the individual’s tastes.
Sam’s Club could leverage the information collected from Scan & Go to identify the eating habits and food likes of its members. They could generate personalized suggestions for product purchase as well as recommendations to try new product launches.
Taking digital transformation to the next level could provide Sam’s Club with a sustainable competitive advantage as they continue to challenge Costco and other online retailers for market share.
In summary, it’s all about the member’s experience to create the right path forward on this journey:
- Great products
- Member-centric approach
- Creating a unique experience most relevant to that member
Here at S4RB we’ve seen firsthand how retailers can increase their private brand sales by using technology to collate and then share consumer feedback with their suppliers. Take a look at this case study: Customer feedback focus increases private label sales by 18%.