Walmart's move to shutter 63 Sam’s Clubs and convert a handful into spaces to fulfill online orders is a sign of the times.
It comes as Walmart and its retail brethren scramble to compete with Amazon, the nation’s biggest online merchant, in part by having their stores double as e-commerce fulfillment hubs.
"We’ll convert some [stores] into ecommerce fulfillment centers to better serve the growing number of members shopping with us online and continue scaling the SamsClub.com business,” said John Furner, president and CEO of the warehouse club, in a letter to employees.
Getting the model right for efficient and cost-effective merchandise delivery has become table stakes for retailers. That’s because they’re serving multichannel shoppers who increasingly buy online, from their smartphones, in store, or via some combination of the three.
What’s more, shoppers are demanding faster and faster delivery, including same-day delivery and even two-hour delivery. Target, for example, reported this month that all of its stores now fulfill online orders.
"While we were surprised by the decision to close 10% of the Sam's Club units, we applaud Walmart for making the difficult decision to rationalize the store base in an effort to maximize profitability and further improve its e-commerce operations," said Joseph Feldman, an analyst with Telsey Advisory Group, in a research note.
Reviving The Business
Expanding the e-commerce business is one piece of on overall revival strategy at Sam's Club outlined in October at Walmart's investor's meeting.
Furner said then that in the first half of 2017, SamsClub.com’s sales were up by 27%. “But I think most exciting for the business is, year-to-date, we're up over seven million visits, which tells us we're on the right track,” he said then.
Sam’s Club’s business has lagged that of warehouse club rival Costco, but showed improvement in the most recent quarter ended in November, when comp-store sales, excluding gas, rose 2.8%.
The retailer has been taking a wide-ranging approach to boosting performance. After serving “too many types of small business segments,” it narrowed in on one target customer: busy suburban families — whether they’re business owners or not — with an annual household income between $75,000 and $125,000, Furner said in October.
Sam’s Club is also working to improve its fresh food business, and investing in technology to expedite the checkout process, like its mobile-checkout perk Scan & Go, as usage of the device doubled last year.
Still, Feldman said the club closures and conversions will be Costco's gain. "We found that Costco is within five miles of 35% of the closing Sam's Club locations and within 10 miles of 59% of the closing clubs," Feldman said in the research note. "This is a high geographic overlap and indicates that Costco should be able to capture a sizable percentage of Sam's Club sales and members."
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