Sam’s Club Adopts Personalized Discounts to Attract Customers
Sam’s Club is a warehouse club owned by the retail giant Wal-Mart (NYSE:WMT) and directly competes with other warehouse clubs like Costco (NASDAQ:COST) and BJ’s Wholesale Club (NYSE:BJ). It charges a membership fee to its customers and gives them an opportunity to buy goods at the lowest prices in the market. We estimate that Sam’s Club constitutes only 4.5% of the $65 Trefis price estimate for Wal-Mart’s stock.
Retailers usually offer across-the-board discounts and deals aimed at different categories of customers. Sam’s Club, however, has started an innovative program called eValues, which offers discounts to members based on their shopping history. Below we discuss how the eValues program will help Sam’s Club attract customers and sell more merchandise.
Personalized Discounts Will Help Sam’s Club Create Demand, Increase Sales
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The eValues program offers active members of Sam’s Club personalized bargains based on his or her buying history and purchasing habits. This means that the discount rates available for a certain product will differ from customer to customer.
We believe that personalized discounts will encourage more customers to make their purchases from Sam’s Club. Apart from attracting new customers, this program will also help increase sales to existing members, as personalized discounts would create additional demand for goods and encourage existing members to buy more.
Higher demand for goods will help drive up Sam’s Club’s average annual revenue per square foot (RPSF), which we estimate to be about $586 currently in the US. You can modify the forecast below to see how Wal-Mart’s stock could be impacted if Sam’s Club’s RPSF were to increase as a result of personalized discounts.
eValues Program Can Attract More Members To Plus Membership
The eValues program is available for Sam’s Club’s plus members who pay a fee of $100, much higher than $40 paid by regular members. To enjoy the benefits of eValues program, a customer is required to sign up for the more expensive plus membership.
The eValues program will be more beneficial for members who buy a large number of goods from Sam’s Club. These members can upgrade to plus membership and save money on personalized discounts. Attractive discounts are likely to tempt plus members to buy more than their usual purchases which can drive growth in RPSF for Sam’s Club.
You can see our complete model for Wal-Mart’s stock here.