For a long time Sam's Club has resisted the use of coupons, unlike their competitors BJ's and Costco. I think they wanted to reinforce that prices were already as low as possible. But this summer Sam's rolled out a new program called eValues, but its only available to "plus" members. Regular members pay a $40 annual fee while plus members pay $100. I think this program aims to convert more regular members to plus members.
A member's purchase history is analyzed to determine what coupons are most applicable, then the offers are presented to the member via website, in-store kiosk, and mobile phone. The member then selects the coupons to be "loaded" on their membership card. The coupons are automatically applied at checkout, without having to use scissors at all.
Apparently the coupons are from product manufacturers, so the coupons don't impact Sam's margins. Traditional coupon programs try to get consumers to try new products by enticing them with discounts. With eValues, they seem to be offering coupons for the products you're going to buy anyway. That's a win for the consumer but not necessarily for the manufacturer. This reinforces my hypothesis that the goal is really to increase plus membership.
Nevertheless, I think the program will be very popular.
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Comments (2)
David,
How can Sam's Club offer manufacturer coupons without it impacting margin.
When the manufacturers provide Sam's Club (or any other retailer) with coupons they have to account for the cost of the redemption on those coupons. If Sam's Club has already negotiated the lowest possible cost how can the manufacturer afford to give away more margin? The only option for the manufacturer is to increase the cost of goods to the retailer. It just doesn't make sense.
Posted by Brian | September 20, 2009 7:22 PM
Posted on September 20, 2009 19:22
Good points, Brian. My point is that the discounts offered are subsidized by the manufacturer, and the technology keeps redemption costs low. Yes, eventually the manufacturer will get his margin, but perhaps at the expense of some other retailer's customers.
Posted by David | September 22, 2009 3:17 PM
Posted on September 22, 2009 15:17