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

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

Welcome to the Walmart-owned membership club’s first all-digital store — and a preview of what could be its future.

Inside the club, which will open in mid-October, customers will have to use a smartphone app called Scan & Go to ring up their purchases as they walk through the aisles. In the area typically reserved for cash registers, the company will display online-only items as wide-ranging as a 12-foot Christmas tree and a five-carat lab-grown diamond. Members can scanQR codes and go straight to the items in the app.

Store workers will have about four times more space for preparing customers’ e-commerce orders for curbside pickup and home delivery, according to Sam’s Club executives.

“It’s kind of the physical manifestation of a journey we’re trying to go on as a company,” Sam’s Club CEO Chris Nicholas said, as he showed off the club before its grand opening.

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 has spun out several key innovations that its parent company now uses, too, such as Scan & Go. It’s also used digital offerings to try to outmatch its largest rival, Costco.

Sam’s Club is doubling down on that strategy with the Dallas-area store, which is reopening nearly two years after it was damaged by a tornado.

Nicholas said upon its reopening, the location will become a testing ground for Sam’s Club’s newest features and emerging technology.

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

He added that he hopes “it feels like what it’s 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 experiences,” he said, such as introducing a permanent station in some of the clubs where a chef makes sushi rolls in front of customers.

And notably, Sam’s Club has differentiated iself by embracing e-commerce offerings and appealing to customers who are seeking easier and faster ways to shop, such as 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 roughly the same number of U.S. clubs, but Costco pulls in about twice as much 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 U.S. clubs.

Sam’s Club has made several other key moves to catch up to Costco: It consolidated its private labels from more than 20 different brands into a single one: Member’s Mark. It cut back on the number of unique items it sells, so it focuses on the proven and popular ones. And it recently announced it would raise average hourly wages for nearly 100,000 of its workers ahead of the holiday season.

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

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

Sam’s Club’s comparable sales in the U.S., a metric that includes sales from stores and clubs open for the previous 12 months, grew 5.2% in the most recent quarter, which ended July 31, compared with the year-ago period. That included 22% year-over-year e-commerce growth.

Nicholas said the new clubs, including the one that’s opening in Grapevine, will be designed to better handle higher volume, too.

For example, the club’s cafe will include a pizza robot that will be able to make as many as 100 pizzas in an hour. It will also test a new system that delivers food orders to an assigned cubby after customers order through Scan & Go.

Like its parent company, Walmart, Sam’s Club has been attracting customers across a wider range of incomes and ages as it focuses on offering convenient ways to shop. About half of the new members that joined Sam’s Club during the most recent quarter were millennials or Gen Z, according to the company.

The company said 1 in 3 members currently use Scan & Go when shopping in clubs. It has recently rolled out new exit technology that automatically checks customers’ shopping carts and allows them to exit the club without an employee looking at a receipt or auditing their cart. Shoppers walk under an archway that’s powered by computer vision and artificial intelligence. That system functions similarly to Amazon’s Just Walk Out technology that’s begun to take hold at events stadiums in addition to some of the e-commerce giant’s physical storefronts.

But Nicholas, the Sam’s Club CEO, acknowledged some shoppers may be reluctant to embrace new technology or a new routine.

Tiffany Zuniga, a mom and a Lyft driver who lives in the Dallas area, said she’s eager to return to Sam’s Club, but is a little wary of the new technology. Zuniga said she used to turn to the club for easy family dinners or supplies for church events, but switched to Costco when Sam’s Club was closed because of tornado damage.

She’s never used Scan & Go and said she hopes the new technology doesn’t come at the expense of customer service.

“Sometimes it can get a little dicey if you scan the wrong thing or need help,” she said. “Hopefully, they will have enough staff on hand.”

As construction crews finished up work on Sam’s Club in Grapevine, the retailer put up signs at the nearby Sam’s Club gas station and car wash to alert customers to the return of the club and encourage them to download the Scan & Go app.

And when customers walk into the newly reopened club, employees will be ready to help them download the app or to tag along on a shopping trip if they need help learning how to use it, the company said.

Nicholas said there will be no change to the number of store workers in Grapevine, but some will have new roles.