The following is a recap of the presentation that Sam's CEO, Brian Cornell, gave as part of the Bentonville Bella Vista Chamber's WalStreet speaker series in Bentonville - with additional NMB insights.
Cornell’s presentation, “Retail in the New Normal,” might not have revealed any major structural changes since Linda Hefner presented to the same group mid-year; however, he did draw attention to a few consumer trends that are top-of-mind for Sam’s just as retailers go full throttle into the make-or-break holiday shopping season.
Cornell spoke of ongoing “dampened consumer demand” and the reality of unemployment and the credit crunch; however, thankfully, many other major retailers since then have reported positive November comps (Sam's prime competitor, Costco, turned in 9% comp store gains, with BJ's Wholesale Club up 5%). Because Walmart doesn’t report monthly same-store sales, we won’t see how the company fared until February, when fourth quarter results come in.
Regardless of any short-term good news, though, it’s clear that consumers’ buying patterns have changed along with the ways they make buying choices. Not only do consumers feel the need to“rationalize” their behavior, as “connected consumers” they also can enlist their friends, family and peer networks to help them do it while they are in a store. Adding pressure to retailers, this connectivity is ushering in a new era of price transparency. Not only can shoppers check with their social networks to get a second opinions on a price, apps such as Red Laser (which claims “Impossibly accurate bar code scanning”) and Amazon’s just-released Price Check comparison app are making it easier than ever before to compare retailers’ prices across all channels.
Amazon’s app is particularly insidious as it gives customers the option to scan a barcode, snap a photo or speak or type a product name to instantly receive prices for that item from Amazon and other online merchants. The app displays prices sorted from lowest to highest, incorporates Amazon shipping discounts when available, and presents a secure, one-click purchase option. Price Check essentially turns brick-and-mortar stores into showrooms for goods that might otherwise remain undiscovered in its endless online aisles. Throw in Amazon’s inherent tax-free advantage (in most states) and “prime” shipping option and you have a multi-channel game-changer.
Last month, Sam’s launched its own shopping app, which focuses on improving all aspects of the club’s online and offline shopping experience, and Sam's uniquely offers wi-fi in its stores as well. Cindy Davis, Sam’s EVP of marketing, membership and dotcom, recently stated that its members “over index in smart phone shopping compared to the general market.” In a November interview, Cornell plainly stated that "in a transparent pricing environment, I'm really confident Sam's Club wins." Clearly, Sam’s is determined to stay in the conversation with members rather than ceding its value proposition to others.
In terms of category focus, Sam’s is closely following, and responding to, the “return to home economics.” Whereas storage bins might recently have been at the top of the shopping list, Sam’s sees a trend toward consumers simplifying, donating and de-cluttering their home while spending more time in them than they used to. According to Cornell, thanks to celebrity chefs, food once again has become entertainment and appliances that once did little more than take up space are being dusted off and put to good use. Sam’s is determined to make “big bets” and home entertainment is one of them.
Cornell reviewed the “third customer” concept (business customers who come back and shop for personal items) and the four categories of roles (everyday needs, wow, simple solutions and excitement) that Linda Hefner covered during her presentation and added that Sam’s small business customers are tending toward “just in time” shopping.
The questions from the audience, most of which were submitted anonymously, dug more deeply into these themes. When asked how retailers will command loyalty in the “new normal,” Cornell stated his overarching goal of “going from loyalty to advocacy.” Loyalty comes from unlocking value and defining value uniquely by category; advocacy is when consumers tell their friends that they could buy an iPad at Sam’s or when they are proud to say that they bought their holiday meals’ ingredients there.
Cornell stated that although Sam’s concept “travels well,” and he in fact just had returned from China, his focus will be on taking the company’s US business to the next level.
When asked the inevitable question about Sam’s strategy for Members Mark and private brands in general, Cornell reiterated Hefner’s position that “unlike (their) competitor,” Sam’s is not assigning private brand goals by category. He provided an update by mentioning former Kraft pizza head John Boswell’s appointment as a “new leader” (Mr. Boswell has been Sam’s SVP of proprietary brands for three months). He also alluded to a “brand architecture” initiative that might be in the offing.
Cornell defined Sam’s greatest strengths as its “breadth of portfolio” – a “collection of great categories, superior brands, great technology and high-quality food”– and the fact that the club channel is generally well-positioned. What does he worry most about? Building the right team to drive the strategy to the next level and bringing “even greater talent” into the club than it has now.
Even if retail is operating in the new normal, some things never change!