Sam's Club

Sam's, Costco, and BJ's Wholesale rank as the dominant players in the warehouse club industry. Sam's Club, a division of discount merchandiser Wal-Mart Stores, is one of the nation's leading operators of members-only warehouse stores. The division runs over 450 stores across the country. Sam's Club sells to some 41 million customers who pay an annual fee to become members. Members can shop at Sam's sprawling stores, which are typically 110,000 to 130,000 square feet, and offer more than 4,000 items, from fresh groceries to auto supplies, clothing, and pharmaceuticals. The clubs also offer additional services such as a mail-order pharmacy, travel club, Internet, and long-distance services, car loans, and discount credit card processing. Mark-up on Sam's Club items is just over wholesale, so goods at these stores are deeply discounted over other vendors. Sam's Club sells to small businesses such as restaurants, daycare centers, and offices, and also markets to individuals. Sam's Club entered the warehouse club market in the mid-1980s, after Wal-Mart founder Sam Walton studied the success of other similar ventures. After some consolidation in the industry, Sam's Club leads the market neck-and-neck with close competitor Costco. Sam's Club was created by Sam Walton, the remarkable retailer who brought the nation Wal-Mart stores. Walton had built a chain of Arkansas five-and-dimes in the 1960s, and increased this to almost 300 stores in the South in the 1970s. Wal-Mart Stores, Inc. incorporated in 1971 and was a billion-dollar operation by 1980. Wal-Mart stores were located in small towns, usually in markets so small that other retailers avoided them. The stores offered deeply discounted goods, and rural people flocked to them. Wal-Mart continued to expand across the nation in the 1980s, keeping in the main to small towns. Sam's Club debuted in 1983 as something of a corollary to the Wal-Mart small-town strategy. The warehouse stores were designed for an urban market, giving Wal-Mart Stores, Inc. access to customers it did not otherwise reach. Sam's Club took advantage of the distribution know-how of the Wal-Mart chain. An analyst for Morgan Stanley quoted in Discount Store News for December 9, 1985, described Wal-Mart's distribution network as using "some of the most sophisticated systems currently devised." The chain already knew how to hold down costs, and it amplified this skill at Sam's Clubs. Merchandise was moved mechanically whenever possible, so that few human hands needed to touch it on its journey from factory to customer's car. In addition, Wal-Mart had studied the market carefully before plunging into the warehouse business. The urban market of the warehouse store was a great complement to the small-town market of the Wal-Mart chain. The two chains added to each other without competing. Another analyst quoted in the Discount Store News article claimed that Wal-Mart and Sam's together could "serve almost all the potential shoppers in a market." Serving everybody was quite a proposition, but it seemed possible. The Sam's chain grew rapidly, and accounted for a larger portion of Wal-Mart's sales each year through the 1980s. Between its founding in 1983 and 1985, Sam's Clubs opened in urban markets in the South and Southwest. The chain entered the Midwest in 1986. By 1987, Sam's had 84 stores. This included stores it bought in 1987 when Sam's took over the warehouse chain Super Saver Wholesale. Super Saver had gone head-to-head with Sam's in ten southern cities, and had another 11 warehouse stores in the South. But it was not profitable, and in 1987 Sam's took over the chain, closing some stores and reopening others under the Sam's banner. In 1989, Sam's began moving into the Northeast. This region had little exposure to the warehouse store concept, and was not a Wal-Mart stronghold either. Sam's opened its first store in the Northeast in Delran Township, New Jersey, and planned to open other stores in New York, Delawar