As a seasoned retail industry expert and self-proclaimed "picky shopper", I‘ve long been fascinated by the success and staying power of wholesale clubs like Sam‘s Club. With their massive scale, zealously loyal customer base, and ability to undercut competitors on price, it‘s no wonder these members-only warehouses have become a retail force to be reckoned with.
One question I‘m often asked is whether Sam‘s Club offers franchising opportunities for enterprising individuals looking to get in on the action. It‘s easy to see the appeal – aligning oneself with a proven, nationally recognized brand, tapping into a wildly successful business model, and all those bulk purchase discounts! But the reality of how Sam‘s Club operates is a bit more complex. Let‘s unpack what‘s really going on behind those towering steel shelves and concrete floors.
Understanding Sam‘s Club‘s Business Model
First, a quick primer for the unfamiliar. Sam‘s Club is a membership-based wholesale retailer, offering a wide array of goods – from groceries and household essentials to electronics and furniture – in a no-frills, warehouse-style format. Shoppers pay an annual fee ($45 for a basic membership, $100 for a "Plus" membership with additional perks) for the privilege of accessing Sam‘s Club‘s bulk offerings and discount prices.
Founded in 1983 and named after Walmart founder Sam Walton, Sam‘s Club now boasts over 600 locations across the U.S. and Puerto Rico, with additional stores in Brazil, China and Mexico. As of FY 2021, Sam‘s Club reported total revenue of $63.9 billion, making it a significant contributor to parent company Walmart‘s bottom line. For context, that‘s more than the GDP of Croatia!
But here‘s the key thing – every single one of those 600+ Sam‘s Club locations is fully owned and operated by the company itself. No franchises, no licensees, no independent operators. This corporate ownership structure is a core tenet of Sam‘s Club‘s strategy, and one that sets it apart from many other retail and restaurant chains that have relied heavily on franchising to fuel their growth.
Why Doesn‘t Sam‘s Club Franchise?
So why has Sam‘s Club eschewed the franchising model entirely? It really boils down to three main factors: control, complexity, and its connection to Walmart.
1. Maintaining strict quality control and brand consistency
By owning all its locations outright, Sam‘s Club retains complete control over every aspect of store operations – from inventory and pricing to staffing and customer service standards. There‘s no risk of a rogue franchisee going off-script or cutting corners in a way that could damage the carefully cultivated Sam‘s Club brand. Corporate ownership allows for complete uniformity and consistency across stores, which is especially important when you‘re dealing with a membership model where customers expect a certain experience no matter which location they visit.
2. The sheer complexity and scale of Sam‘s Club‘s operations
The average Sam‘s Club store is a beast, spanning 134,000 square feet, employing 150-175 people, and stocking over 6,000 distinct items. Toss in additional services many locations offer like gas stations, tire centers, pharmacies, and liquor sales, and you‘ve got an operational labyrinth that would be extremely difficult (and costly) to replicate as a franchise. Franchisees likely wouldn‘t have the capital, expertise or economies of scale to effectively manage such a massive undertaking.
3. Reliance on Walmart‘s vast resources and infrastructure
As a subsidiary of Walmart, Sam‘s Club is deeply intertwined with the world‘s largest retailer‘s operations. Everything from supply chain logistics and distribution to marketing, technology and real estate is shared with or heavily reliant on Walmart‘s massive infrastructure. Attempting to franchise Sam‘s Club would mean severing or somehow apportioning those shared resources, an extremely difficult endeavor. Independence from Walmart simply isn‘t in the cards for Sam‘s Club.
Stacking Up Against the Competition
Of course, Sam‘s Club isn‘t the only wholesale club game in town. Its biggest rival, Costco, has also found tremendous success with a very similar members-only, buy-in-bulk model. In fact, Costco beats out Sam‘s Club in terms of sheer size and sales volume, with over 800 locations worldwide and $163 billion in revenue for FY 2020 – that‘s more than double Sam‘s Club‘s yearly take.
But interestingly, Costco shares Sam‘s Club steadfast commitment to corporate ownership over franchising. Costco‘s leadership has long touted the benefits of total control over operations, consistency across locations, and not having to share profits with franchisees. Sound familiar? The wholesale club industry seemingly lends itself to this company-operated structure, as even the smaller BJ‘s Wholesale Club chain (with around 220 stores concentrated in the eastern U.S.) has stuck to a strictly corporate-owned model as well.
The Future Outlook for Sam‘s Club and Wholesale Clubs
So what does the future hold for Sam‘s Club? While the retail landscape is always evolving (particularly with the continued rise of e-commerce), wholesale clubs have proven surprisingly resilient thanks to their strong value proposition and focus on the treasure hunt shopping experience.
Even as more shoppers migrate online, Sam‘s Club has adapted by bulking up its own e-commerce operation, offering curbside pickup, same-day delivery through Instacart, and leveraging Walmart‘s massive logistics network to get products to customers quickly and efficiently. In-store, Sam‘s Club continues to prioritize the elements that have made it a success for nearly four decades – a wide merchandise assortment, low prices, and a continually rotating selection of unique items to keep shoppers coming back to see what‘s new.
Here are a few stats that underscore Sam‘s Club‘s continued strength:
- Membership income increased 12.7% year-over-year in Q4 FY21
- Membership renewal rates remain at an all-time high (no specific figure given)
- Comparable sales (excluding fuel) rose 15.8% in Q4 vs. the prior year
- E-commerce sales grew 21% in FY21
Of course, challenges loom on the horizon. Rising labor costs, supply chain disruptions, and the ever-present threat of Amazon and other online players could all eat into Sam‘s Club‘s margins going forward. But the company‘s solid financials, loyal membership base (at 47 million and counting), and the backing of parent company Walmart all bode well for its continued success.
The Bottom Line for Shoppers and Entrepreneurs
From my perspective as a retail expert and discerning shopper, it‘s not hard to see the appeal of Sam‘s Club for both customers and aspiring business owners. For consumers, the promise of bulk savings on trusted brands and the thrill of discovering a unique treasure buried in one of those mammoth aisles is a strong lure – not to mention perks like cheap gas and free hearing tests. And entrepreneurial types are understandably drawn to any opportunity to hitch their wagon to a proven star in the retail universe.
But as we‘ve seen, hitching one‘s wagon directly to Sam‘s Club in the form of a franchise simply isn‘t an option. The wholesale club‘s commitment to corporate ownership and control is ironclad and deeply tied to its core identity and relationship with Walmart. That said, there are still plenty of ways for individuals and businesses to partner with Sam‘s Club and benefit from its success, whether as a vendor, service provider, or even an employee working their way up the ranks.
And who knows what the future may hold? While company-owned stores will likely always be Sam‘s Club‘s bread and butter, perhaps we‘ll eventually see some new form of licensing or partnership model that allows for a degree of independent operation. But for now, the only way to fully immerse oneself in the Sam‘s Club ecosystem is to pay your membership dues and start scouring those shelves for deals. Happy shopping!
