Business model of Sam’s Club

Customer Segments

Sam’s Club offers its products to the general consumer population, primarily targeting customers in the following segments:

• Middle Income Families, comprising families with children who have an annual household income of between USD 75,000 and USD 100,000; and
• Small Business Owners, comprising owners of small businesses, such as independent retailers, as well as independent entrepreneurs, to whom the Company offers bulk discounts on items and dedicated business services.

Sam’s Club has notably developed a range of services aimed directly at small business owners, such as healthcare, payroll, and legal services, which are available as part of its membership for business program.

Sam’s Club is headquartered in the US, which is its core market.  The Company serves customers across 44 US states and the territory of Puerto Rico.

Until recently the Company also served customers in Canada, but no longer has any significant international operations.

Value Propositions

Sam’s Club provides value to its customers in the following ways:

• Reputation and Standing – Sam’s Club is an established name in the US retail warehouse club space, with a positive reputation that dates back the 1980s and a close association with American retail giant Walmart;
• Sales Reach and Accessibility – Sam’s Club makes its products accessible to a wide consumer base, operating warehouse locations across 44 US states and the territory of Puerto Rico, as well as operating a self-service online sales portal;
• Product Range – Sam’s Club offers a wide variety of merchandise, spanning groceries, office equipment, household goods, electronic appliances, apparel, toys and games, and sports equipment;
• Affordable Prices and Membership Benefits – Sam’s Club offers its members a rage of high quality products at low prices, with customers able to accrue savings that far outweigh the Company’s annual membership fees;
• Ancillary Services – Sam’s Club offers various ancillary services to its members, notably offering business services such as payroll, healthcare, and legal service solutions to its small business customers; and
• Customer Service and Experience – Sam’s Club provides customers with high quality customer service, as well as a relaxed and enjoyable customer shopping experience both online and at its retail outlets.

Channels

Sam’s Club primarily serves its customers directly through its network of members warehouse clubs across the US.  The Company currently operates close to 600 such outlets across 44 states and the territory of Puerto Rico.

These outlets are typically spread across an average of 136,000 square feet and are located close to communities and metropolitan areas.

Sam’s Club additionally operates an online store through its website at www.samsclub.com, through which customers are able to browse products, place orders, and schedule deliveries or pick-ups on a self-service basis.

Sam’s Club operates its own distribution and warehousing infrastructure which supports the Company’s core retail operations, ensuring that stores across the US are served reliably and efficiently.

The Company also utilises the services of third parties to support its distribution needs.

Customer Relationships

Sam’s Club provides services directly to its customers primarily via its in-store sales personnel, who  interact personally with customers, assisting them in their shopping experience, responding to queries, handling complaints, and providing guidance.

The Company seeks to establish lasting relationships with its customers through this high quality services, as well as through its various deals, discounts, and special offers.

Sam’s Club requires that kits customers are members.  Through its membership scheme, customers are then able to access discounts, deals, and exclusive savings that typically outweigh the value of the annual membership fee.

Customers are able to access their membership accounts on the Company’s website, and can track orders, manage their account details, and track available cash rewards  online.  The Company also uses its website to provide its customers with information on its various store locations, its products, its suppliers, and its departments.

Sam’s Club operates a dedicated customer support team, which operates out of the Company’s offices and provides personalised support to customers over the phone and online.  The Company is also able to communicate directly with customers through its various social media accounts, including with Facebook, Twitter, Pinterest, and Instagram.

Key Activities

Sam's Club operates as a retailer and a membership warehouse club that provides a broad range of products to members in the US.  The Company’s product offerings include groceries, electronics, furniture, auto products and tyres, jewellery, flowers and gifts, toys and games, apparel and shoes, appliances, books, cigarettes and tobacco products, electronics and computers, sports and fitness, and household goods.

The Company also offers products that are targeted specifically at small business owners, such as office equipment, janitorial and cleaning products, and salon and barber shop items, as well as services such as payroll, legal services, and healthcare solutions.  Sam’s Club operates a network of around 600 clubs in 44 US states and Puerto Rico. It is a subsidiary of Walmart.

Key Partners

Sam’s Club works closely with a broad network of companies and organisations in support of its core retail operations. These partners can be organised broadly into the following categories:

• Supplier and Vendor Partners, comprising suppliers of merchandise and produce that are sold across the Company’s warehouses, as well as third party providers of services that support the Company’s corporate activities more broadly;
• Service Partners, comprising various third party service provider that offer ancillary services to Sam’s Club members on the Company’s behalf;
• Marketing and Affiliate Partners, comprising a network of marketing agencies and online businesses that assist in extending the Company’s marketing and sales network both online and offline;
• Community and Social Partners, comprising a range of non-profits and charitable organisations with which the Company collaborates on social and community projects across the US; and
• Strategic Partners, comprising various other commercial enterprises with which the Company collaborates on business development, technology, and strategic projects.

In recent years, Sam’s Club has notably launched a strategic partnerships with Instacart and Synchrony, a community partnership with John Brown University, and a data partnership with First Data.

Key Resources

Sam’s Club’s business model is dependent on its ability to make high quality products accessible to a broad range of customers at affordable prices.

As such, the Company’s key resources are its network of warehouse retail clubs, its merchandise and inventory, its suppliers and supply chain, its distribution and storage infrastructure, its partnerships, its online store and IT infrastructure, and its personnel.

Sam’s Club’s most essential assets are its network of physical retail outlets, which number around 600 across the US.  The Company’s core retail operations are supported by its own and third party distribution assets.

Cost Structure

Sam’s Club incurs costs in relation to the operation of its stores – including utility and occupancy costs, the acquisition of supplies and merchandise, the procurement of third party services, the payment of salaries and benefits to its personnel, the implementation of marketing and advertising campaigns, the management and maintenance of its IT infrastructure and online store, the management of its partnerships, and operation of its distribution infrastructure.

Revenue Streams

Sam’s Club generates revenue through the operation of a chain of members warehouse clubs across the US.

The Company derives the bulk of its revenue in the form of sales fees collected directly from customers at point of sale, including across its physical outlets and via its online store, as well as the collection of membership fees from members.

The Company also generates a smaller portion of its revenue through the provision of other services.

In 2018, Sam’s Club recorded total annual net sales of USD 59.22 billion, up slightly on the USD 57.37 billion recorded by the Company in 2017.