For 22 million small business owners in the United States, success depends on expense control, operational efficiency and consistent, quality materials. Many successful businesses believe simplicity is the key to success. As the largest U.S. membership warehouse club with a focus on small business owners, SAM’S CLUB has found helping small businesses succeed – while helping itself succeed – is as easy as 1-2-3.
The warehouse club arm of retail giant Wal-Mart Stores operates more than 540 clubs nationwide. Its 46 million customers, who shop at the clubs through paid memberships, are primarily small business owners, the company says.
SAM’S CLUB has categorized its small business members into nine core Standard Industry Codes (SIC). These businesses include convenience and retail stores, restaurants, offices, repair shops, daycares and schools, churches and religious organizations, beauty salons and barber shops, motels, bed and breakfasts and vending companies.
The company says it understands that “the success of small businesses depends in part on mastering the basics – expense control, operational efficiency, and consistent, quality materials.” With those needs in mind, it developed the SAM’S CLUB 1-2-3 Philosophy, which states that the company is:
- In business to serve small business through wholesale items. “Entrepreneurs will consistently find the core items needed to run a successful business,” Sam’s Club says.
- In business to serve small business through personal/treasure hunt items. The company explains small business owners will find outstanding deals on personal items including designer- label apparel, electronics, jewelry, furniture, seasonal merchandise and restaurant-quality food and wine.
- Allowing members to benefit from No. 1 and No. 2. Consumers are invited to become members so they can purchase both the personal and business merchandise with “crossover” appeal, such as food.
Back to Small Businesses
Small businesses are the engine for economic growth in the United States and represent a powerful vehicle for opportunity. They provide approximately 75 percent of the net new jobs added to the economy; represent 99.7 percent of all employers; employ 50.1 percent of the private work force; and provide 40.9 percent of private sales in the country.
SAM’S CLUB has taken note. In fact, Celia Swanson, executive vice president of membership, marketing and administration, says in her 10 years with the company, the most significant change she’s witnessed is what it is happening right now: the refocus on being in business for small business.
“Getting back to that has been motivating and reenergizing to the business and has been motivational and inspirational for our associates, too,” she says. “Entrepreneurship is the American dream, and we’re creating strong relationships with small businesses to build their loyalty and to help make them successful. Small-business members shop three times more often than an individual member, and the membership renewal rate is significantly higher.”
Swanson says SAM’S CLUB’s 1-2-3 Philosophy exemplifies the focus on small business.
“We’ve created a database to find what small businesses are best served by SAM’S CLUB and which ones do we have a better opportunity for growth and market share,” Swanson says. “It’s been a lot of fun building relationships with business members and becoming the club for the community. We’re deepening the relationships one member at a time.”
What SAM’S CLUB offers to businesspeople is low prices on a daily basis in order to drive costs out of its members’ businesses, Swanson explains. This gives them a competitive advantage and adds to their bottom line.
SAM’S CLUB says it doesn’t engage in gimmicks, rebates, passports or coupons that result in sporadic savings. In addition, the company strives for its prices to be lower than competitors. These savings add up for its small business members, considering how much they spend to furnish their businesses. “Our products and prices are the absolute best quality,” Swanson says. “We pinch pennies so we can pass on savings.”
With nearly 50 million club members in the United States, SAM’S CLUB has a great opportunity to retain current members and recruit new ones.
First and foremost, Swanson says, the target member is an owner or manager of a mom-andpop business. “These include those small businesses that employ 25 or less people,” she says. “These are entrepreneurs; they are the drivers of our economy. They are finding the best values at SAM’S CLUB because we offer the opportunity for large purchasing at lower costs.”
Families are another, smaller segment of SAM’S CLUB memberships. SAM’S CLUB caters to personal needs with an array of products including food and beverages, clothing, small appliances, automotive accessories, tools, books, DVDs and CDs, health and fitness items and sporting goods, jewelry, fragrances, phone cards, wedding products, art supplies and toys.
Meeting Needs of Small Businesses
No matter, what business its members are in, chances are, SAM’S CLUB has the equipment and materials they need. “We have such a broad offering of core items needed to set up an office such as legal tabs, pens, pencils, ink toner, computers, etc.,” Swanson says. “We also have restaurant needs including register tape, receipts, take-out bags, cups and trash bags. We have janitorial cleaning products, which every business needs. “Businesses also need break room products such as vending machines with beverages, snacks and candy,” she continues. “We do a terrific job serving any small businesses’ needs.”
It’s not enough to “guess” what businesses need. SAM’S CLUB actually visits its best business club members to study what they use.
“We study the items that they have, study our club items and do an invoice comparison,” Swanson says. “It’s really more about building relationships between club manager, sales associate and the member. Our ultimate goal is to teach businesses how to save money at SAM’S CLUB and get the word out about our product assortment.”
Other ways SAM’S CLUB helps small business members is through timesaving services. Gold Key hours for business-only shopping is one way, Swanson says.
The Gold Key hours are Monday through Friday, 7 a.m. to 10 a.m., and Saturday 7 a.m. to 9:30 a.m. “These are the hours that are most convenient for small business owners to shop before they open their own businesses,” Swanson says.
Fax ‘n’ Pull and Click ‘n’ Pull are other programs that allow small business members to conveniently shop SAM’S CLUB. “This services allows members to order online or via fax from their local club’s inventory and easily pick up merchandise at the front of the club on their next visit,” Swanson says. “We’re working to continue serving our members in our efforts to save time and money.”
At the core of what differentiates SAM’S CLUB’s is its low membership fee. To become members, businesses must pay an annual fee of $30, which is the lowest in the industry. “We’ve become pure in our small business membership pricing,” Swanson says. “We have the lowest prices and the best value in the industry. Our membership fees are not something we have to discount or give away.
“We’ve been able to drive some increased loyalty from members because of our low membership prices,” she continues.
“When they pay to shop, they get a return on investment. We don’t just ask them for their membership dues and not work to get them a return on what they invested in us. That’s how we’ve been able to achieve our record levels of partnership retention with small business members.”
A Different Club
Big clubs such as BJ’s and Costco help keep SAM’S CLUB on its toes when it comes to competition. But there are myriad ways in which SAM’S CLUB works to differentiate itself from those clubs while developing benefits for its members.
One way is to give its members valuable benefits beyond its in-store merchandise. “Entrepreneurs often face the challenging task of not only serving customers, but acting as ‘minidepartments’ – such as human resources, MIS and finance – within their own businesses,” Swanson says. “Staying on top of all of these demands is challenging.”
SAM’S CLUB offers a range of additional services and benefits that help minimize the time and money small businesses need to spend on these challenges, such as:
- Health and vision insurance
- Retirement planning
- Payroll services
- Physical business improvements
- Web site development
- New customer identification
- Auto buying
- Credit card services
Consistent in-stock basic suppliers that are critical to members’ businesses are always guaranteed; however, SAM’S CLUB also offers an invoice reporting so members can monitor purchases and payments on a regular basis.
“This has been an important tool for our members as they work to develop their own efficient, consistent businesses,” Swanson says.
Another feature SAM’S CLUB members can utilize – and one that is fairly new to SAM’S CLUB – is Web site design. “Having a Web presence is really important in furthering one’s business so we offer our business members different levels of Web design,” Swanson says. “They can buy a standard package in which it takes less than an hour for us to help them set up. Or, we can customize their Web program by setting up e-commerce capabilities, for example.
“Members appreciate that we can offer a high-quality Web platform quickly,” she continues. “The members appreciate the personalization.”
Members are also eligible to receive discounts on the things most businesspeople like doing outside of work: taking vacations away from home.
Members can get great deals on thousands of top-brand cruises and vacation packages by choosing from voyages on 17 cruise lines and vacations to the Caribbean, Hawaii, Mexico, U.S. cities and others.
In addition to vacations,Web design services and other members- only benefits, SAM’S CLUB says it is now offering great savings on gasoline at select locations.
“[We’re] committed to bringing [our] members the very best values and benefits associated with membership,” according to the company.
Spreading the Word
According to Swanson, industry analysts say warehouse shoppers save 25 percent annually over retail shoppers.
With that amount of savings, it’s no wonder so many have decided to become members of warehouses such as SAM’S CLUB. In efforts to get the word out about the savings benefits SAM’S CLUB offers, the club depends on word of mouth more than anything else.
“We count on current members to refer new members through our Refer a Friend Program,” Swanson says. “Current members are great ambassadors.”
In addition to word of mouth, SAM’S CLUB sends direct mail pieces to prospective members. Regular mailings are also sent to current members.
Small business members are sent Source Magazine, a publication that was written and designed just for small businesses as a resource for them as they consider their product and service needs. “Source Magazine is an important part of our overall communication strategy as it includes stories that hopefully share best practices among members,” Stewart says. “It covers things like how to access loans for small businesses and discusses new product launches, as well as highlights products that can help them serve their bottom line.
SAM’S CLUB is also conducting a radio campaign to broadcast its ongoing mission to be in business for small business.
Building alliances is another strategy in SAM’S CLUB’s effort to spread the word about the benefits its clubs offer to small businesses. First, it has strong ties with the Small Business Administration (SBA), a government agency that works to inspire creativity in the American economy by developing and supporting entrepreneurs through a network of partners.
The SBA also acts as an advocate for small businesses by taking a leadership role in building a partnership between the American people and its government. Its team focuses on delivering results for small business, being accountable, accessible and responsive.
Additionally, it seeks to empower the spirit of entrepreneurship within every community to promote and realize the American dream, and facilitates the environment necessary for America’s small businesses to succeed, measuring its performance by small business success. “We developed a partnership alliance by including articles by the SBA in Source Magazine,” Swanson says.
SAM’S CLUB also partners with the U.S. Chamber of Commerce, which works to advance human progress through an economic, political and social system based on individual freedom, incentive, initiative, opportunity and responsibility. “We really try to create relationships with organizations that serve small businesses and bring opportunities for them through marketing communications,” Swanson says. “We source a lot of business through chamber of commerce relationships. Club managers participate and are members of local chambers. Being involved in the local community is a great way for us to get our message out.”
SAM’S CLUB has also developed a management academy, which is an alliance between SAM’S CLUB and the American Chamber of Commerce Executives (ACCE).
In August 2003, the ACCE was awarded a three-year, $300,000 grant from the Wal-Mart Foundation on behalf of SAM’S CLUB. The grant was provided to assist ACCE in its efforts to offer practical knowledge, learning opportunities and potential non-dues revenue streams for chambers running community- based business development programs.
“Chambers are the backbone of small business in our society,” Swanson says. “From initial start-up information to marketing channels to networking opportunities, chambers play a critical role in the growth of small business.
“SAM’S CLUB recognizes the value of the chambers of commerce throughout the [United States],” she continues. “With this generous grant, SAM’S CLUB is standing behind its commitment to the work of the chamber and the professionals who manage them.”
Through the creation of the SAM’S CLUB Small Business Management Academy, ACCE can provide the necessary tools and resources to advance the knowledge of chamber professionals, as well as their small business members, Swanson says. With the input from a steering committee of peers, SAM’S CLUB has already created several new products and services to help small business owners better manage their operations. “Each month, we pick one of our nine target SICs and invite them into our club for awareness and information about how we can help them,” Swanson says. “We usually try to line up the month in which the SIC is at its peak. During the course of the meeting,we also learn from them on ways in which we can save them money and ways they can grow their bottom line. “We are working to create even more programs over the next few years,” Swanson continues. “More importantly for chambers is the fact that this grant gives us the investment capital we need to make these programs self-supporting. This initial gift will keep on giving long past the life of the grant.”
Not So No-Frills
It is often said that SAM’S CLUB takes a “no-frills” approach within its clubs to keep costs down. Concrete floors, steel fixtures, bright lights and products stacked tall toward the high ceilings are what one would expect upon entering the club store.
Although it’s still very much no-frills, Swanson says over the years, the company has worked to improve the club experience. “The environment is high energy; it’s not dark and dingy – it’s very bright, open, inviting and appealing,” she says. “There is a lot of enthusiasm that comes from the treasure hunt part of the shopping experience.” Treasure hunt items are the “wow items” members might not normally expect to find, such as big-screen TVs, Prada bags and wood bedroom furniture sets.
Treasure hunt products are constantly rotated, so club members are finding new items from visit to visit. “If they like what they see, they’d better buy it now because they might not be there the next time,” says Mark Horton, general manager of the SAM’S CLUB in Evanston, Ill. “Once they’re gone, they’re gone.” According to Doug McMillon, executive vice president of merchandising, SAM’S CLUB wants to “surprise” its members with the ever-changing treasure hunt items it offers.
“A member might find an outdoor fire pit in September and a new nativity set in November,” he says. “When our small business members come in, they might be shopping for their business needs, but they’ll be surprised by all the items they can use in their personal life.”
SAM’S CLUB tries not to overlook what drives its small business members when it comes to their personal needs. “These are very busy people; they’re the hardest-working people in the country,” McMillon says. “They are working many days a week and are personally vested in the business to make it successful.
“When they come into our club and see something they want for personal use, they go ahead and buy it,” he continues. “They make these personal purchases they are limited to time they can do their shopping; they are time crunched.”
The small business members are a unique market also because, McMillon says, “they’re aspirational – that’s why they’re into business for themselves. They want to make more money.” For that reason, it’s not uncommon to see big names such as Waterford crystal, Sony TVs, Godiva chocolates and Liz Claiborne. “We save them time and offer them a value because of our low margin structure,” he says. “Ten percent margin covers 10 percent of our expenses; the rest is from memberships.”
Marketing Growth Goals
From a marketing perspective, Swanson says SAM’S CLUB’s continued focus will be on driving deeper relationships with its small business members. “We’re setting a baseline for being in business for small business,” she says. “Some small business members might not realize the array of services and product, as well as benefits we can give them. Depending on their needs, there are many opportunities ahead of us going into these next 18 months to two years.
“We will continue to drive consistency in building quality relationships, a member and a club at a time,” she adds. “Our strength is our independent club and associate focus. It’s a relationship-based business, so we must become more aware of that with our grand openings. We must enhance our enthusiasm of small businesses and emphasize to them how we can save them a significant amount of money.”</p