inside sam`s club

INSIDE SAM’S CLUB
With 500+ pharmacies,
hundreds of optical and hearing centers and a three-tiered
strategy built on awareness, prevention and solutions,
Sam’s Club exercises its right to win in health and wellness.
WINNING
WELLNESS
Activating health and
wellness for growth
By RoB EdER
Coming off its seventh consecutive quarter of strong same-store
sales growth, Sam’s Club is rallied around a singular goal to be the
fastest-growing brand in the warehouse channel. It’s engrained in
everything Sam’s Club is and does, from the executives in Bentonville, Ark., on down to all 611 clubs across the country.
To help achieve that mission, Sam’s Club in recent years has
placed a heightened focus around its health and wellness businesses: pharmacy, over-the-counter medications, optical services and its
most recent addition, in-store hearing aid centers. These businesses
accounted for roughly 5% of the nearly $54 billion in sales Sam’s
Club generated last year.
Sam’s Club health and wellness merchandise strategy is not just
about stealing market share from its competitors or even just getting
more sales out of an area of the business, which on paper, would certainly seem to show room for growth. Like anything else Sam’s Club
does, amping up the volume on health and wellness services and
items comes down to one thing: giving its members what they want.
“I think if you asked any of our suppliers ‘What are they trying
to accomplish at Sam’s Club?,’ the first thing any of them would tell
you is ‘Give the members what they want,’” Sam’s Club Senior Vice
President of Health and Wellness Jill Turner-Mitchael told Drug Store
News in January, as part of an exclusive series of interviews with the
company’s senior leadership team in pharmacy, health and wellness.
You see, Sam’s Club executives don’t just see health and wellness as an
opportunity to grow the business; they also believe it is their right to do so.
The way its leadership looks at it, they have been charged by their members
to make health, wellness and prevention a much bigger part of the offering
at Sam’s Club. They call it “the right to win.”
And how do they know? Simple. “They told us,” Turner-Mitchael said.
The decision to go after health and wellness was borne out of extensive
customer research and shop-alongs, and based on responses from more
than 9,000 of Sam’s Club members, Turner-Mitchael explained. “Our
members literally told us what they think of us category by category and
item by item,” she said. “They told us what they expect from us in ‘feeding the family’ and ‘personal wellness,’ and they told us that these are
areas where we have the right to win with them.”
And all of this has helped inform Sam’s Club overall merchandising
strategy, which rests upon three core principles:
• Offer merchandise that is unique and relevant to its members;
• Deliver superior value that its members can’t get anywhere else; and
• Create a preferred club experience for its members.
That has meant a greater focus on the presentation of health and wellness categories in the clubs around three integral components: awareness,
prevention and solutions. New and remodeled Sam’s Club locations make
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an unmistakable emphasis around health and wellness, with the
pharmacy and OTC areas clearly visible from the moment you enter
the building. It has meant the addition of new services like hearing
aid centers and optical centers, and important new programs, including a yearlong calendar of free health screenings in its clubs and
a new health magazine for members, which at an 8 million copies
boasts the largest circulation of any other health-related consumer
publication in America.
To make it all come together in a way that is unique and relevant,
and that resonates with its members, Sam’s Club relies on three key enablers, Turner-Mitchael told DSN — like supplier collaboration, an area
in which Sam’s Club consistently gets high marks from its vendors. According to DSN sister publication Connecting Northwest Arkansas’ “Annual Vendor Survey,” there is wide agreement among its suppliers that
they understand Sam’s Club overall growth strategy, Sam’s Club merchants are open and receptive to new products, and that Sam’s Club
will be a significant growth channel for their companies for the next
five years. “We can’t bring anything unique and cool to our members
if our suppliers are not collaborating with us,” Turner-Mitchael said.
“You also need to have strong merchandising capabilities and organizational alignment,” she said, noting the other critical enablers of
the company’s strategy. “You have to align these businesses in a way
so that not only can each execute on its own, but so that they [also] can
find the synergies that exist between each other.”
In the pages that follow, DSN examines the people and the programs that are activating these strategies for Sam’s Club and helping
it win in health and wellness with its members.
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A mission to do good
while doing wellness
By RoB EdER
You might say to know who you are; it helps to know what you’re not. That
kind of self-awareness has helped Sam’s Club executives identify some areas
in which it believes it can win in health and wellness — an area where it is,
self-admittedly, a newcomer to the dance. It is helping inform a health and
wellness merchandising strategy built around three core pillars: awareness,
prevention and solutions.
“We know that we’re new to the game; we’re not Walgreens; we’re not
CVS,” Sam’s Club Vice President of Health and Family Care Jason Reiser told
DSN. “We have to make our members aware of the services we have to offer.”
Call it “a mission to do good while doing well,” Reiser explained. “Whether
it’s filling scripts, whether it’s the optical department, whether it’s the hearing
aid department ... our members are only recently getting engaged in these offerings. We want our members to engage with our health professionals and have
a relationship with them. We know that there’s a certain loyalty to Sam’s Club,
but once members engage with one of our healthcare professionals that loyalty
skyrockets. And that’s where the magic begins, because then they buy more of
everything else in the club — more soap, more shampoo, more vitamins, more
scripts, more eyeglasses. That’s where we really see the bang for our buck.”
But it’s not all just about selling more stuff. To say that the decision to expand
its presence in health and wellness was borne simply out of an effort to grow
sales is a bit too simple. Really, at the heart of it all, this is about Sam’s Club making a difference in its members’ lives — maybe even saving a few lives along the
way — and becoming a bigger part of their everyday lives.
Helping to drive awareness for its health and wellness offerings, Sam’s Club
hosts a different health-screening event in all of its clubs on the second Saturday of
each month. The screenings, available to members and non-members, are an important way that Sam’s Club communicates that it is serious about health and wellness.
“So maybe you came to the club to buy toilet paper or to try some free samples,
but you also happened to find out if you have diabetes or if you have a possible
problem with your prostate — we’re saving lives at the same time,” he said.
Another way it keeps that message going everyday is through social media,
where it is interacting directly with members and non-members alike. “We want
to have a strong presence in [social media] because that’s where many of our
members are making purchase decisions — and even ‘where-to-purchase’ decisions,” Reiser explained. Indeed, with more than 420,000 likes, Sam’s Club is
engaging with Facebook users on a daily basis, and it frequently uses that presence to promote dialogue around health and wellness issues, to learn more
about its members — and potential members — and to drive awareness for
the full range of its clinical offerings. For instance, a post in early March to
promote its allergy-screening event generated about 90 likes, 17 shares and
more than a dozen comments. A post one week earlier promoting the Baby
Center section of its website drew almost 220 likes.
Sam’s Club also hosts regular Twitter parties with physicians
and other experts, such as the one it conducted March 14 with
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Heidi Murkoff, whose New York Times bestseller “What to Expect When
You’re Expecting” has evolved into a brand of its own and a larger
partnership with Sam’s Club.
Murkoff also is a contributing editor in Sam’s Club new Healthy
Living Made Simple magazine, which debuted in January — it’s newest, big health and wellness-driven initiative, which actually cuts across
both the awareness and solutions components of its merchandising
strategy. With the third-highest circulation of any consumer magazine
in America — No. 1 among health-related publications — and a total
reach of some 8 million people, it is yet another strong example of Sam’s
Club’s efforts to raise its profile in health and wellness, Reiser noted.
“You want to talk about getting serious and communicating to our
members that we’re committed to health and wellness?”
But where Sam’s Club really believes it can make a difference is by
applying the formula it has applied to the other areas of its business,
like electronics and everyday needs, and offering its members a certain
mix of products and services that can help them live happier — and in
this case, longer and healthier — lives and at a lower cost than they can
find anywhere else.
“Where we want to win in a big way is in this prevention space,” Reiser explained. “The other thing you can call prevention is chronic disease
[management]. Whether it’s HBA, whether it’s baby care, whether it’s
OTC, vitamins and supplements ... when it comes to preventive care, there
is no place better to shop than at Sam’s Club. That’s what we want to be
about. Day after day, that’s what we’re promoting.”
This focus on prevention is helping to inform the other components of
its merchandising strategy in health and wellness — particularly, its third
key pillar, solutions, and finding ways to make health and wellness and
prevention simple for its members.
A strong example of that is the program it has developed around omega-3
fish oil. “If you think about fish oil, traditionally in a drug store, there might
be 10 to 15 different fish oil SKUs — different milligrams; coated, uncoated;
different kinds of fish, salmon, krill,” Reiser said. “We really just wanted to
streamline it for the member.” Simply Right Omega 3s come in three variations — single, double and triple strength, which for under $20 a bottle
“packs the same power as some prescription omega-3 doses,” he added.
Creating solutions is absolutely critical to the Sam’s Club mission to
break through age-old perceptions of what the warehouse club channel
is traditionally known for. “We’re known for a limited SKU environment
— we’re known for an item at a price. ‘Solutions’ is not naturally what the
club channel is known for,” Reiser.
To chip away at those old perceptions, Sam’s Club utilizes a couple of
key tactics, including a strong emphasis on pod merchandising displays
that help to communicate that Sam’s can go beyond a single item on a
shopping list. In January, for example, Sam’s Club was showing a pod focused around tooth whitening. “So, toothpaste may have been on your list
before, but what the member may not have been aware of is that we can
help whiten your teeth,” Reiser explained. “Whether it’s whitening mouth
rinse, whether it’s whitening toothpaste, [whether it’s] whitestrips, or its
one of the highest quality power toothbrushes on the market ... we have
the best value and quality.”
The whitening pod was wrapped in a palette skirt with big product
5 • April 2012
WELLNESS
imagery and huge type that practically screams out the savings: some $93
saved by purchasing all four items at Sam’s Club versus some other retailer. “Membership here starts at $40,” Reiser said. “I’ve just saved twice
the cost of my membership just by buying the four items on this pod. We
are able to take one purchase, which may have been the toothpaste and
turned it into four items. That’s a big deal.”
Another way that it is creating solutions is by taking its messaging right
out onto the steel where members interact with the merchandise, through
the use of QR codes — for now, just on its house brand Simply Right vitamins and supplements. Members can scan the code on the package to
download a quick video of a physician explaining the health benefits of
that particular item. “We want to tell our members what to take,” Reiser
said. “Everyone wants to be healthier, but they don’t necessarily know
what that regimen should be.”
It’s a nice informational service for its members, but it certainly isn’t
all about philanthropy either — there is significant return on the extra investment in the QR technology. “We’ve seen research where 1-of-5 people
that scan QR codes actually purchase the product. We want to hone in on
that, because we know that an educated member is a loyal member that
spends more money and buys more products at Sam’s Club.”
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More than one way
to count a script
By MichaEl JohnsEn
There is more than one way to count prescriptions — particularly, at Sam’s
Club where its 540 pharmacies are complemented by more than 500 in-club
optical centers and a growing number of hearing aid clinics, projected at 200
centers in-club by the end of the year. Given the changing demographics
and health profile of Americans, and the growing health needs of many
Sam’s Club members, this clinical combination offers a powerful solution
to help people prevent and treat chronic illness.
The combination of pharmacy, optical and hearing aid centers creates a
number of opportunities for Sam’s Club to touch its members and forge
more meaningful relationships by building awareness and utilization of
its broad range of clinical services. “Once we transform a member into
a patient, that clinician-to-patient relationship is a very difficult bond to
break,” Sam’s Club Vice President for Health and Wellness Operations
and Compliance Jim Langman told Drug Store News. That transformation is important because, according to Sam’s Club executives, when a
member becomes a patient for one of its clinical offerings, that member
is more likely to continue their membership and tends to purchase more
items throughout the club — not just health and wellness, but also items
in daily needs and fresh food. This holistic, total club approach falls under Sam’s Club strategy to increase awareness, prevention and solutions. This strategy was enhanced last year with a total realignment of
all Sam’s Club operations teams, which formed coordinated and cohesive
management teams from the individual markets to the home office.
“Just think about what goes on in your personal life,” Langman explained. “Everything from your doctor to your barber to where you get your
car fixed — there’s a barrier you have to break down in terms of not knowing
that person and not knowing the quality of the service you’re going to get. When
it comes to health care, normally it takes three interactions between a patient and a
clinician before the patient really feels comfortable having a complete, personal discussion with that clinician. Once you go through that barrier, it’s something you don’t
want to go through again — particularly with something as important as your health.”
One area Sam’s Club believes it can make a difference in is the treatment of and
prevention of chronic conditions.
“We don’t have 24-hour stores, and we’re not on every corner. Our strength is in
helping people treat and prevent disease,” Langman said. “If you look at patients with
chronic conditions, they only take their maintenance medications [on average] for about
5.8 months a year. They should be taking them as directed on an ongoing basis. Improper medication adherence is a huge problem in this country.”
As America wrestles with the $1 trillion healthcare-reform question, there are approximately $300 billion per year in otherwise unnecessary healthcare costs leaking into the
system as a result of improper medication adherence. “One of the great things about
Sam’s Club is that with our low cash prices, the fact that we take most major
insurance plans, with our technology, certified and licensed clinicians, we
can help patients start on their medication routine and stay on their
medications as directed. ... [And] if we just do that and help our
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patients to take their medications the correct
way, we can slow down the progression of
their current chronic conditions and the development of comorbidities,” Langman said.
To further knock down the price barrier, in
December 2010 Sam’s Club introduced special
prescription benefits for its Premium Plus members, offering an additional 40% off the cash
price of generic drugs and 8% off the cash price
of brand-name drugs. The Optical Plus Membership Benefit introduced in December 2011 entitles members to $40 off a second pair of glasses.
To fully understand the special holistic role
that Sam’s Club can play with its various clinical teams, consider the health profile and typical behavior of an average patient with diabetes. “When you consider members with chronic
diseases who are on maintenance medications,
they’re not just taking one drug and they’re
not just taking it one time. Diabetic patients
can benefit from a more complete care package, including annual eye examinations, testing
supplies, pharmacist consulted OTC and a prescription medication regimen,” Langman said.
“Our clinical operations are aligned to help
members understand what preventative tools
they need and how many wellness solutions
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WELLNESS
are available to them under one roof.”
Its hearing aid centers — a new business for
Sam’s Club, currently operating in 120 clubs —
offer Sam’s Club another way to fill an important
role in an area that is growing quickly as the rate
of incidence of hearing loss continues to escalate
at an accelerated pace and is occurring much earlier in life. As Langman explained, “Where once
the average age at which people tended to develop meaningful hearing loss was in their late 50s,
today it is occurring in people in their early 50s.”
Furthermore hearing loss is occurring at
an alarming rate among teenagers and young
adults, a problem that is expected to worsen in
today’s high-volume headphone-based culture.
“Today there are more healthy teenagers with
measurable hearing loss unrelated to other medical conditions than ever before,” said Langman.
“Our Certified Hearing Aid Specialists customize hearing aids for all ages.” Specially made for
Sam’s Club members, Sam’s Club hearing aids
are customizable with up to 64 channels, tailoring fit and feel to a wide range of patients. Sam’s
Club provides free vision and hearing screenings in all clubs that have those departments.
Sam’s Club pharmacists and other clinicians
play important roles in Sam’s Club monthly
health screening events, and also are encouraged
to get out from their departments and interact
directly with members in the club — another
important way Sam’s Club looks to forge the
connection that makes members feel cared for
like patients. In fact, all of its pharmacy managers and optical managers receive B.A.S.E. sales
training that teaches clinicians how to more effectively communicate with members and patients. But it’s not just for use inside the clubs.
Sam’s Club also gets its clinicians involved in
membership drives to business members and to
detail physicians and other healthcare providers
in the community to make sure they are aware
of the quality and depth of service Sam’s Club
can provide. “A good example of that is going to
the clinicians in the community with our complimentary hearing test certificate, which allows
the neighboring clinicians to confidently refer
their patients to Sam’s Club,” Langman said.
In the end, it all comes down to connecting
to members like patients, and growing its health
and wellness business. And, with the powerful
combination of clinical services and products
that Sam’s Club can offer, there are a number of
ways for Sam’s Club to get there. After all, there
is more than one way to count a script.
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Collaborating for value
By antoinEttE alExandER
Research has revealed that shoppers initially join Sam’s Club to get great
prices on those items the retailer has coined as “everyday needs” products — things like paper, laundry and household cleaning supplies. But
understanding how and why members shop its clubs has helped Sam’s
Club identify opportunities to introduce them to other categories and
products they may not be shopping Sam’s Club for — areas where
Sam’s Club believes it can bring its members even more value, such
as pharmacy and health and wellness. It also has helped Sam’s Club
deliver more growth for its suppliers.
At the heart of both ends of that relationship — between its members on one side and its vendors on the other — is a strong focus on
supplier collaboration and joint business planning, or JBP, as Sam’s
Club executives frequently refer to it.
“We have a different view from most in terms of working with our
suppliers,” explained Vice President of Consumables George Agnacian.
“A lot of people ask us, ‘what does joint business planning mean? What
does it look like?’ For us, it’s less about a process and more about a
mindset. We don’t want it to be transactional. We want to develop a
relationship with our suppliers. The secret is how do we unlock mutual growth together — not just in the short term, but [also] in the long
term? It’s not unusual for us to work with our suppliers far in advance
of a product launch — sometimes years in advance.”
That work goes far beyond just the sales teams that are calling
on Agnacian and other merchants at Sam’s Club. Often, it entails
long-term planning with the brand team back at corporate headquarters to create club-specific items, special club packs and special values for Sam’s Club members, Agnacian explained.
Clearly, it is a process that appears to be working quite well, as Sam’s
Club typically receives high marks from its vendors in such areas as supplier collaboration and joint business planning. On a scale of one to 10, with
10 being the highest level of agreement, about 60% of vendors scored a seven or better in terms of their company’s understanding of Sam’s Club’s strategic vision and where their brand fit it, according to Drug Store News sister
publication Connecting Northwest Arkansas’ “2011 Annual Supplier Survey.”
About 45% believe the state of collaboration and joint business planning at
Sam’s Club has never been greater than it is today, scoring their level of
agreement at a seven or better. In terms of its merchants being accessible and
receptive to new products, almost 50% rated Sam’s Club a seven or better.
And perhaps the best barometer of the strength of its vendor relationships:
Almost 60% scored Sam’s Club a seven or better in terms of the contribution the retailer will make to its company’s growth over the next five years.
One example of how Sam’s Club works to win together with its suppliers is in its eValues program, which is designed to encourage
upgrade activity to Sam’s Club $100 Plus membership. According to company executives, the program continues
to grow and is helping to drive solid upgrade activity, with more of its members joining at
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the Plus level and renewals at the highest rate in 10 years.
eValues relies on a complex series of rich algorithms, developed by
Fair Isaac, inventor of the FICO credit score, to find gaps in member
purchasing, and identify categories and products they may not be currently buying, through targeted customized offers that are loaded directly onto members’ cards. Members can utilize a special eValues kiosk
at the entrance of the club to check for available offers and can use their
personal computers at home or their smartphones/tablets, as well.
“Our suppliers love this because we can guarantee that the sales
that come from this system are incremental for our suppliers, that the
members that these eValues are served up to haven’t purchased that
product before,” or they served at times outside of the traditional
purchasing cycle, Agnacian told DSN.
One strong example of an area in which Sam’s Club tries to create
incremental purchases and convert its everyday-needs shoppers into
health-and-wellness customers lies in the space where Agnacian’s
categories meet up with prevention. In January, during the height of
the cold and flu season, Sam’s Club featured a special four-pallet pod
merchandising display devoted to Lysol hand sanitizer, disinfecting
wipes, disinfecting spray and the dietary supplement Emergen-C.
The pod displays identify member needs and then create solutions
to fill that need.
“We bring all of these products together that create a prevention
solution for our members,” said Agnacian, whose team handles paper, laundry and cleaning, pet care and some of Sam’s Club business
categories, such as restaurant supplies and commercial cleaning.
It’s another way that Sam’s Club works with its suppliers to bring
more value to its members and at the same time mutually grows the
business. It’s helping Sam’s Club convert members to patients, and
that’s a bond that is very difficult to break.
Percentage of suppliers who believed Sam’s Club was a significant
distribution channel that made a meaningful contribution in 2011
20%
16.7% 16.7%
15%
15%
11.1%
10%
10%
8.9%
7.8%
4.4% 4.4%
5%
0%
1
2010 8.1
percentages
5%
2
3
4
7.3
8.1
5.7
5
6
7
11.4 10.6 15.4
8
9
14.6 10.6
10
8.1
Level of agreement
(1 = strongest disagreement; 10 = total agreement)
Source: CNWA Supplier Survey 2011
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Connecting dots
of awareness,
prevention, solutions
By alaRic dEaRMEnt
While hospital beds, surgery and intensive care units are not likely to
crop up at any pharmacy retailer in the near future, there are some areas in
which drug stores, supermarkets and mass merchandisers are ideal destinations for health care, thanks to the presence of the pharmacist.
One example is screenings for everything from heart health to women’s
health to diabetes to other issues. And while many retailers have periodic
screening events and equipment like blood-pressure monitors, few have
offered screenings on the same scale as Sam’s Club. Director of Business
Development for Health and Wellness Angie Muldoon told Drug Store
News that the company had conducted more than 1 million screenings
in 2011, with the ultimate goal of driving prevention, awareness and solutions for healthy living. The work of Muldoon and her team helps
Sam’s Club connect the dots between Sam’s Club overarching awareness, prevention and solutions in health and wellness, and is critical in
the company’s mission both to attract new members and convert existing members to patients.
“It’s everything from glucose to blood pressure to cholesterol; and
then with that information, [members] can make the right decisions
for their own health,” Muldoon said. “So certainly then, on awareness,
our screening events are available not only to our members, but [also]
to the general public. We do that because we think it’s important to drive
awareness of their own individual health, whether they’re a member or not,
and then also to drive awareness of our OTC, pharmacy and [health and
beauty aid] areas.”
That also enables Sam’s Club another opportunity to drive new membership
and also to convert existing members to pharmacy patients and users of its
other clinical services, such as its optical departments and hearing aid centers.
Beyond awareness, the retailer also seeks to provide solutions to health
problems that may appear during screenings. One way it does this is to build
strong relationships with suppliers that lead to customized programs for Sam’s Club,
Muldoon said. In January, for example, Sam’s Club started offering free smoking cessation consultations with sponsorship from GlaxoSmithKline. During the consultation,
the pharmacist can guide smokers looking to quit to such products as GSK’s Nicorette
chewing gum and NicoDerm patches. Its pharmacists receive special training to become
certified smoking cessation counselors.
Beyond the general health themes that many retailers tend to participate in, such as
blood-glucose screenings during National Diabetes Month, the company also has taken
some less common approaches to screening events. In March, it offered free allergy screenings that tested for the 10 most common allergens. It also offers prostate-specific antigen screenings for men, which it will do in June to coincide with Father’s Day,
as well as thyroid screenings for women who accompany men obtaining
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the screenings. Some of these more sophisticated biometric tests are a bit more expensive to perform, but it
is an important investment that Sam’s Club makes to
communicate to its members that Sam’s Club is serious about wellness and prevention in a way that still
delivers a lot of value to its members.
Another way that Sam’s Club is working to tie together its awareness-prevention-solutions strategy is
through the launch of its new magazine, Healthy Living
Made Simple. The bimonthly, wellness-focused magazine is the first warehouse club publication solely dedicated to health and wellness. And with a total reach
of some 8 million people, Healthy Living Made Simple
also has the honor of being the third-highest circulation among all consumer magazines in America and
the No. 1 health-related publication. Sam’s Club is delivering 7.4 million issues directly to members’ homes,
with recipients selected based on purchase habits at the
club, and another 600,000
are available to shoppers
at the clubs — about 1,000
copies per location. Healthy
Living Made Simple is also
available on the new Sam’s
Club iPad app and readable using e-flip at SamsClub.com/healthyliving.
Content, writers and
departments are based on
extensive member research
as to how shoppers define health and wellness.
“What we learned is that
our members really define
health and wellness in a
broad way,” Muldoon said.
“Every member defines it a
little bit differently. So it’s
not just OTC, and it’s not
just pharmacy; it’s fresh
and it’s beauty, and it’s so many other areas of the club. Our members define
health and wellness for all those they care about, so that’s everything from
babies and children to pets. We thought it would be important to take the
magazine, focus on general health themes … and give members tips and
tricks about how to manage all those different topics.”
Sam’s Club vendors play a strong role in the publication both from
an advertising and content-development standpoint. Celebrity “editors”
include Jillian Michaels, who has appeared on such TV shows as “The
Biggest Loser,” “The Doctors” and “Losing it with Jillian,” and Heidi
Murkoff, author of the New York Times best-seller “What to Expect When
You’re Expecting,” who will write a parenting or pregnancy related
column in every issue.
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