Sam’s Club is now delivering pizzas, but it’s not trying to be the next Domino’s
Serving up hot pizzas has long been a way for Sam’s Club to get members through its doors in person to start shopping. Now, by delivering those same pizzas, the Walmart-owned club retailer is using that same strategy to get hungry members to try out its delivery services.
In May, Sam’s Club announced that, after requests from members, it had started delivery of the Member’s Mark 16-inch pizza at most locations and would roll it out to all of them by the end of the month. The retailer also encourages shoppers to order salads, bakery items or other products from Sam’s Club alongside their pizzas. The pepperoni, cheese and four-meat pizzas each cost $8.98, likely less than the cost of a pizza from a member’s neighborhood pizza restaurant.
“We’ve sold hot pizzas in our cafes for a long time, and they’re large — you can get an entire large pizza for the cost of a slice down the street,” Sam’s Club svp and CFO Todd Sears said at the Evercore Consumer and Retail Conference in New York City on June 11. “We had this idea of, like, ‘Hey, we’re doing so much in delivery, why don’t we start delivering pizzas?”
Like Walmart, the club retailer continues to build out its e-commerce capabilities to complement its stores. Delivery is Sam’s Club’s fastest-growing segment and plays into the retailer’s lofty growth goal of doubling memberships in the next eight to 10 years. Sears said, over the last five years — even without adding more locations — the retailer’s member base has grown 33% while sales have grown 50%.
Sears explained how effective the pizza has been so far in getting members to order more than just pizza. The average order value of an order with pizza, according to him, is 10 times the price of the pizza itself. A major factor likely encouraging customers to spend is that delivery is free with orders of $50 or more. Often, this is the first time customers have ever ordered a delivery through Sam’s Club, he said.
“Pizza is introducing members to these channels, and we’ve learned on the Walmart side that when they get introduced to these channels, they don’t go back,” Sears said. “It’s the same thing as Scan and Go [in-app checkout]; when someone uses Scan and Go, they don’t go back. … The trick is getting people into these channels, and pizza is serving that role for us and has been very effective.”
Separately, on June 9 at Oppenheimer’s consumer growth and e-commerce conference held virtually, Walmart evp and CFO John David Rainey also praised how pizza can work to expand the Sam’s Club business.
“You may hear that [Sam’s Club is delivering pizza] and think, ‘Gosh, that can’t be very economical for you to deliver a pizza to someone from a club,'” Rainey said, adding that the average basket size with pizza was more than $100. “Members are taking advantage of the broad assortment we have, and while they’re getting a pizza delivered, they’re buying general merchandise or other items to go along with that, which makes that e-commerce delivery very attractive from an economic perspective for us.”
However, the pizzas come with potentially high delivery charges and long wait times. It’s $8 extra for Express Delivery, which is delivery in three hours or less.
Unsurprisingly, Sears said a significant percentage of members ordering pizza pay for that three-hours-or-less delivery.
“It’s really not advantageous if you’re just ordering it for dinner Friday night or something like that; you really are incentivized to build a bigger basket,” said Anna Brennan, Kantar’s principal analyst covering clubs and specialty retailers. “And I think that’s partially intentional. … They’re not trying to deliver pizzas to make it easy for you on a Friday night; they want you to combine [the pizza] with other things.” It could be useful, say, for a party where someone would need pizza as well as other food and supplies, she said.
Brennan said she believes this is just one way Sam’s Club wants to give its membership an edge compared to Costco and to add more value to the membership as people reconsider paying for subscriptions in a tighter economic environment. It could also help promote Sam’s Club’s other prepared food items like salads, a category in which Costco has especially thrived, Brennan said.
“They really are trying to be that digital-first club versus Costco staying a little bit more staunchly in their lane,” by making people come to the club to get their pizza at the food court and shop around, Brennan said. “Sam’s Club is taking the other approach there and saying, ‘We’d still love to have the pizza get you in, but we don’t care if you’re shopping with us digitally, and we’d actually prefer to offer you that convenience.'”
By growing Sam’s Club’s e-commerce reach, people wouldn’t have to live near a physical club to see value in a membership, Sears said. Sam’s Club is remodeling all its clubs, retrofitting some elements of existing clubs to better facilitate e-commerce sales, while also beginning to open new clubs for the first time in years.
“We want our members to choose how, where and when they shop,” Sears said. “That includes in-club, but of course, to do that, you also have to have a big e-commerce presence.”