Big-Box Briefing: Walmart takes over parts of Sam’s Club’s operations

Earlier this year, Walmart U.S. chief growth officer Seth Dallaire was promoted to the same title for the company at a global level, taking on oversight of Sam’s Club’s retail media network. Then, in June, Walmart announced the Sam’s Club media network would rebrand as Sam’s Club Connect as it has become more aligned with the Walmart Connect ads business through shared technology, tools, platforms and capabilities.

These moves represent a shift away from what used to be a more distinct separation between the two brands. Sam Walton said he wanted Sam’s Club to have a separate culture from Walmart when he established the club retailer in 1983.

“The investment and complexity required to build modern retail capabilities — from AI and data to fulfillment and media — make scale a meaningful advantage,” said Srividya Pandya, svp of site and shopping experience for Walmart U.S., in a statement. “Where Walmart and Sam’s Club have common needs, it makes sense to use shared platforms, tools and infrastructure to move faster, reduce complexity and scale what works.”

Greg Pulsifer, svp of e-commerce at Sam’s Club, told Modern Retail that following the migration of the front-end e-commerce experience from Walmart, the company is working on the back end to implement different chunks of Walmart’s capabilities. The goal, he said, is to eventually have full technological parity with Walmart in e-commerce. He said this is being done in different phases, beginning with the fastest-growing Sam’s Club channels, curbside and delivery — which, according to Pulsifer, represent two-thirds of its e-commerce business.

Importantly to the Walmart ethos, combining forces on technology also helps to lower costs, he added.

“Leveraging the technology is a significant competitive advantage, especially in the club space,” Pulsifer said. He added that while the foundation of running an e-commerce business is through the basics like monitoring traffic, getting member feedback and making sure the app is running quickly and that inventory is in stock, “where you see the exponential growth is when you start to layer on new [technology] capabilities.”

Sam’s Club e-commerce sales were up 23% year-over-year in the first quarter, according to Walmart financial statements. “That is the growth I’m talking about,” Pulsifer said. “That comes from the ability to run the business and stack on new capabilities that we’re able to leverage from Walmart.”

Through Walmart’s support, Sam’s Club has added tech functionalities such as the ability to measure how quickly orders will arrive; add items to a delivery order after it is placed; accept SNAP benefits for curbside and delivery; and let customers flag associates when they’re on their way to the club, according to Pulsifer. Coming soon, he added, is a personalization engine from Walmart that leverages AI to curate recommendations for each individual shopper based on what they’ve bought and how often they shop.

“We can move much, much more quickly based on the technology that they have,” he said.

Still, Pulsifer said that members trust Sam’s Club to have distinct membership benefits — like with optical services, pharmacy, a tire and battery center and travel benefits — and a more curated assortment, whereas he sees Walmart as more of an everything store.

The assortment at Sam’s Club is catered to members who Pulsifer said are “fanatical about being able to get value for their membership and saving money through Sam’s Cash,” and want disruptive deals on great brands. “We know this member better than anyone,” he added. “They may shop at Walmart, but at Sam’s Club, they’re expecting something different.”

The pendulum has shifted over the years, “from one extreme, now to the other,” in terms of how close the two banners work together, said Matt Fifer, a former Walmart marketing leader who has since founded industry networking platforms Conversations On Retail and Winning With Walmart.

Fifer added that when he started at Walmart in 1993, the company “went to extremes to create separation between the organizations,” like calling hourly workers partners instead of associates. Scott Benedict of Benedict Enterprises, a retail consultant who held various leadership roles at Walmart and Sam’s Club between 1997 and 2017, said it had always been important to the company that it is serving two different customer or member bases with two different formats.

Benedict and Fifer both said they believe the shift will still benefit Sam’s Club in that it can leverage Walmart’s operational and technological strengths without changing how members interact with or perceive the two brands — as these changes are largely on the back end.

“In some cases, it feels overdue,” Benedict said. “They could have done it before now, but they were very thoughtful in their approach. That it makes a lot of sense, because continuing to use technology to not only drive speed but drive efficiency, this is all a logical evolution of the business.”

Anna Brennan, a principal analyst at Kantar who covers the club space, said Sam’s Club is the primary beneficiary of this operational shift. “Sam’s has built a digital club model that is becoming harder to sustain,” she said. “As it continues to grow, its supply chain and technology investments require better fulfillment density, stronger data monetization and faster technology deployment.”

Benedict says he doesn’t expect Walmart to ever combine any customer-facing elements, as he believes the distinctiveness of the two formats is important to their success, even though Walmart attracts more higher-income shoppers who may also be Sam’s Club members.

“They’re still keeping two business organizations that run it, that are driving advertising revenue and interacting with brands across the two banners,” he said. “But there’s no reason why you have to have the back-office functions, the technology functions be separate.”

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