Walmart-owned Sam's Club tests a future without checkout lines

GRAPEVINE, Texas — When shoppers walk into a new Sam's Club store, they'll soon see a shiny blue Mercedes-Benz SUV, a sectional sofa and empty checkout lanes.

welcome Walmart-owned membership club's first all-digital store — and a preview of what the future might hold.

Inside the club, which will open in mid-October, customers will use a smartphone app called Scan & Go as they walk through the aisles to make their purchases. In an area normally reserved for cash registers, the company will display online-only items in a wide range of sizes, such as a 12-foot Christmas tree and a 5-carat lab-grown diamond. Members can scan QR code and go directly to items in the app.

According to Sam's Club executives, store staff will have nearly four times the space to prepare customers' e-commerce orders for curbside pickup and home delivery.

“It's the physical manifestation of a journey we're trying to continue as a company,” said Sam's Club CEO Chris Nicholas.

Since Walmart founder Sam Walton opened the first Sam's Club in 1983, the membership-based club has become the more tech-savvy arm of its retail-behemoth parent. The club developed several key innovations that its parent company now uses, such as Scan and Go. It has also used digital offerings to try to overtake its biggest rival, costco.

Sam's Club is doubling down on that strategy with Dallas-area stores, which are reopening nearly two years after being damaged by tornadoes.

Nicholas said that after it reopens, the location will become a testing ground for Sam's Club's new features and emerging technology.

“The idea is that over time, we will be a 100% digital engagement as a business, and you have to prove that things work before scaling,” he said.

He added, he hopes to “feel what it feels like to shop in the future.”

Costco has long been “the king of the warehouse club channel,” said Peter Keith, senior research analyst at Piper Sandler. But Sam's Club has added features to “upgrade the shopping experience,” such as introducing a permanent station at some clubs where a chef rolls sushi in front of customers.

And notably, Sam's Club has differentiated itself by embracing e-commerce offerings and appealing to customers looking for an easy and quick way to shop like Scan & Go.

“It really eliminates the most painful part of these membership clubs, which is the long lines to check out,” he said.

Sam's Club and Costco have about the same number of US clubs, but Costco generates nearly double the annual revenue. Net sales for Sam's Club totaled $86.2 billion in its most recent fiscal year, compared with $176.63 billion for Costco's US Club.

Sam's Club took a few more important steps to catch up to Costco: It combined its private labels from more than 20 different brands into one: Member's Mark. It reduces the number of unique items it sells, so it focuses on proven and popular ones. And it recently announced it would raise average hourly wages for about 100,000 workers ahead of the holiday season.

Sam's Club also opened The Clubhouse in August, a nearly 37,000-square-foot office building across from the retailer's headquarters in Bentonville, Arkansas. It includes workshop rooms and equipment such as white boards, arts and crafts supplies, and cardboard models that will help retailers come up with new ideas, test products, and collaborate on projects with cross-department teams.

And it is in the midst of an aggressive expansion, with plans to open about 30 new clubs over a five-year period.

Sam's Club comparable sales in the U.S., a metric that includes sales at stores and clubs open for the previous 12 months, rose 5.2% in the most recent quarter ended July 31 compared with the year-earlier period. This includes e-commerce growth of 22% year-on-year.

Nicholas said the new clubs, including the one opening in Grapevine, will also be designed to better handle higher volumes.

For example, the club's cafe will include a pizza robot capable of making up to 100 pizzas an hour. It will also test a new system that delivers food orders to a designated cubby after customers place their order via scan and go.

Like its parent company, Walmart, Sam's Club is attracting customers across a wide range of incomes and ages because it focuses on offering a convenient way to shop. Nearly half of the new members who joined Sam's Club in the most recent quarter were millennials or Gen Zs, According to the company.

According to Sam's Club, one in three people currently use Scan & Go when shopping at clubs. It recently introduced new exit technology that automatically checks customers' shopping carts and lets them exit the club without a staff member looking at the receipt or auditing their cart. Shoppers walk under an archway powered by computer vision and artificial intelligence That system works the same way Amazon's Just Walk Out technology is starting to take hold in event stadiums in addition to some of the e-commerce giant's physical storefronts.

But Nicholas acknowledges that some shoppers may be reluctant to embrace new technology or a new routine.

Tiffany Zuniga, a mother and a Lyft driver who lives in the Dallas area, said she's excited to return to Sam's Club, but is a little wary of the new technology. Zuniga used to go to the club for supplies for simple family dinners or church events, but switched to Costco when Sam's Club closed due to tornado damage.

He has never used Scan & Go and said he hopes the new technology doesn't come at the expense of customer service.

“Sometimes it can be a bit tricky if you scan the wrong thing or need help,” he said. “Hopefully, they'll have enough staff.”

As construction crews finished work at Sam's Club in Grapevine, the retailer installed signage at nearby Sam's Club gas stations and car wash signs to train customers to prepare to return to a Club and encourage them to download Scan & Go.

And when customers enter the newly opened club, staff will be ready to download the app or tag along on a shopping trip if they need help learning how to use it.

Nicholas said there will be no change in the number of store employees at Grapevine, but there will be some new roles.