By Marianne Wilson

(October 27, 2009) Wal-Mart Stores held its annual meeting for the investment community in Rogers, Ark., on Oct. 21 and Oct. 22. The meeting included a review of Sam’s Club’s future priorities by its president and CEO Brian Cornell.

The presentation offered a comprehensive strategy for Sam's, outlining success criteria and key initiatives to deliver significant sales growth through better member focus. According to Brendan Langan, director of retail insight, MVI, Sam's, through the lens of enhanced data-driven insights into member behavior, will align its business goals guided by two core principles:

• Clarity of value proposition. Under the newly announced tagline "Savings Made Simple," Sam's intends to concisely communicate its brand promise to members, much as Walmart has done with its "Save Money. Live Better" message.
• Leverage other Walmart initiatives, especially Project Impact (the discounter’s store remodeling initiative) via a "uniquely Sam's Club" lense. Adapting lessons learned from Project Impact to fit the requirements of its members.

As to the most important takeaways from the presentation, Langan offered these insights:

1. Sam's has defined each category's role in the building through a new framework. Linda Heffner, Sam's executive VP merchandising, presented what is effectively a category management framework for the item retailer. Driven by an approach that will emphasize "fewer, bigger, better choices" derived from data on member shopping, this framework aims to offer a mix with greater "relevance" and "value" as part of an "improved overall in-club experience." Though the number of total SKUs will remain the same, the mix will shift to emphasize those categories that rank high on both the relevance (trips) and differentiation (basket) scales.

Suppliers should learn their category designation within this framework and start the conversation about the resulting implications (for pallets, displays, etc.). They should also prepare for Sam's Club to rebalance its mix, expand some category SKU counts, and shrink others, all while holding steady on overall SKU count.

2. Sam's will be using new "benefit" and "price" criteria to evaluate items. Items must deliver a value to members such that the ratio of "benefits to price" is positive. Benefit criteria will include: brand, quality, sustainability and service. Price criteria will include: pack size and unit price. Expect Sam's to use these criteria to determine which items will get placement in the club.

3. Sam's real estate focus will be on remodels over new club openings for the remainder of FY 2010 through FY 2011.

Sam's announced that it is testing a new layout, dubbed "Project Portfolio," in its Bentonville, Ark., club. This new layout features lower sight lines, a new center aisle, and a reordering of departments' location and space allotment. The retailer also shared that it will decelerate the rate of new clubs opening for the next two years -- with 15 net club openings this year and only 5-10 next year.

4. Sam's membership strategy will focus on three areas: attraction, retention and upgrading members to the Plus level. Sam's has traditionally focused on both attracting new members and retaining existing members. But now it has announced that upgrading members to Plus level will join these two as an area of focus. Sam's will leverage its eValues program to incent those member upgrades, which could have significant implications for the components of the company’s operating income going forward.

5. Sam's will improve club productivity with a goal of reducing labor hours by 6% to 8% by FY 2015. The remodels will feature labor-savings elements including stocking efficiencies, staffing optimization, task management and other engineering standards.

Suppliers should plan for potential "cost-to-serve" increases in the short term, as Sam's seeks to redefine operational standards -- modifying shipping and pallet design requirements for suppliers.

The changes outlined by Brian Cornell and his team are indeed substantial and represent a meaningful change in Sam's go-to-market strategy. A data-driven member focus will manifest itself in category prioritization, SKU criteria, and the in-club experience.