The CEO of Sam's Club explains why the retailer's decision to shutter dozens of stores was a move to win over the middle class
- Walmart-owned Sam's Club has undergone a number of big changes over the past few years.
- The chain has shut down a number of warehouses across the country, converting some to fulfillment centers and "e-clubs," or mini distribution centers in urban areas.
- CEO John Furner addressed the strategy behind that move at the second annual Groceryshop conference in Las Vegas.
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LAS VEGAS - Sam's Club isn't the same warehouse chain it was a few years ago. Since 2017, the Walmart-owned membership chain has boosted its e-commerce capabilities and closed scores of brick-and-mortar locations. The company shuttered 63 locations in January 2018 alone.
In an interview with CNBC's Lauren Hirsch at the second annual Groceryshop conference in Las Vegas on Tuesday, Sam's Club CEO John Furner spoke about the thinking behind those decisions.
According to Furner, the shift has been about narrowing "the strategy down in terms of merchandising and technology and our footprint."
"A couple of years ago, we decided to really make sure we understood who our core consumer is, what they do, and what they expect from us," Furner said. "And that resulted in a bit of work that caused us to narrow our focus."
So who is the average Sam's Club member? Furner describes them as a homeowner making somewhere between $75,000 and $85,000 a year. The CEO said that emerging changes in terms of this demographic's shopping expectations prompted Sam's Club to put more of a focus on e-commerce and fulfillment processes.
"What's leading the change for us was the change in the way our core consumer shops," Furner said. "The consumer today is obviously looking for great quality, they're looking for great value, which we offer, but they want it delivered or fulfilled on their terms."
That meant closing some of the chain's brick-and-mortar locations - a fleet that now numbers around 600 warehouses - and converting others to fulfillment centers.
Furner said that the move has helped Sam's Club become a company that's "able to deliver at home effectively," as well as maintain its roots as "an environment that you can shop in." Sam's Club now offers a number of fulfillment options, including pickup, garage delivery, and home delivery.
He also addressed the "tougher" business of asking Sam's Club employees to re-train, saying that two-thirds of the affected workforce opted to tackle a new role with the company.
In addition to taking e-commerce on, Furner said that Sam's Club is also concerned with providing its ideal homeowner customers with carefully curated merchandise. He said that Sam's Club stocks a few thousand items, while the average grocer might have an assortment of 40,000 to 50,000 products and a supercenter might boast over 100,000.
"Our job in the product space is to make sure we are curating and coming up with the very best offer that we can," Furner said.