Focus groups are a mainstay of retail, but Walmart’s warehouse club is taking it to another level in its battle against Costco.
Sam’s Club is assembling a large and growing community of shoppers to help it develop new products as it races to expand the value of a membership.
The company said Thursday that its member engagement community has topped 150,000 participants, up from 50,000 two years ago, after it opened the previously invite-only program to all members in February.
“As we enter into this next era for Sam’s Club, it’ll be all about participation in retail,” the chain’s chief merchant, Myron Frazier, told Business Insider. “It’ll be about doing things with our members as opposed to doing things for our members.”
The community gives the retail giant a real-time, detailed view of what matters to US consumers, from healthier food ingredients to better-performing apparel to more eco-friendly packaging.
By leaning into the program, Sam’s Club is doubling down on a systematic, tech-powered approach that isn’t really matched among traditional retailers, most notably its larger rival, Costco.
Tapping into a flood of member data
Wholesale clubs have been having a moment in recent years, posting strong sales and traffic growth from shoppers looking for the best bang for their buck. At Sam’s Club, that has translated to more than $93 billion in sales last year, as well as comparable sales growth of 6.1% for the first quarter of this year.
To be sure, membership-based retailers already have more information about their customers than many other retailers, and Costco also actively solicits member input. The company and its executives are highly responsive to feedback. Costco did not respond to a request for comment on this story.
But the Member’s Mark Community gives Sam’s Club a richer flood of information to improve its products and services.
“We can ask the community a question, and within four hours we can have a report back — and it will be of statistical significance because of the size of our community,” Frazier said.
A recent example of this came when Frazier’s team was deciding on patriotic flavors for a USA-themed summer treat. While retail experts at its Bentonville headquarters expected apples and blueberries to win, the community surprised them by preferring strawberry shortcake.
“We were able to buy a niche item that was that exciting members, and it’s doing extremely well,” he said. “It’s not something that we believe that they want — they’ve told us they want it.”
Frazier said the community helps identify products from national or emerging brands that could reach the sales velocity essential to warehouse retail.
Raising the quality while lowering the price
Sam’s Club quietly launched the community in 2019, shortly before it combined some 20 private-label brands under the Member’s Mark banner, à la Costco’s Kirkland Signature line, which spans motor oil to multivitamins.
The feedback was instrumental in Sam’s Club’s 2022 decision to remove more than 40 unwanted ingredients from Member’s Mark food and beverage offerings.
“Many of your national branded suppliers were not doing it, so we were out front,” said Frazier, who previously managed the brand.
That move scaled up last year to Walmart’s other US private brands, including Great Value and Marketside. Walmart competitor Target this year said it was kicking synthetic colors out of the cereal aisle, too.
“It’s certainly influencing not only our enterprise but broader retail,” Frazier said.
Sam’s Club now gathers data via an app, in-club events, and an AI-powered bot that texts members. Walmart does not disclose Sam’s Club membership numbers or renewal rates, but the company said retention is high among those in the community.
Sam’s Club has also consulted with shoppers to develop other merchandise, from jogger pants to a propane grill to a new ultra-filtered milkshake.
Taking some of the guesswork out of product development has a key benefit at a time when household budgets are stretched: better prices.
One of the first product lines that Frazier worked on with the community years ago was a new line of children’s apparel that balanced parents’ needs for stylish clothing, made with organic or recycled materials, at an affordable price.
“We don’t view innovation and affordability as mutually exclusive,” Frazier said, adding that member insights allow Sam’s Club to shorten the time it takes to get a product from concept to sales floor. “R and D is where the cost really drives up, and we’re able to do that for a fraction of the cost of most brands.”
In terms of quality and price, club store private-label brands are fast becoming one of the best values shoppers can get — and Sam’s Club is trying to make that deal stronger.
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