Sam’s Club Tests Online Subscription Service as Threat From Amazon Grows

Sam’s Club Tests Online Subscription Service as Threat From Amazon Grows

SHELLY BANJO 

Updated Feb. 26, 2014 12:32 p.m. ET

Sam’s Club is quietly testing a new subscription service that allows customers to order items like diapers and printer cartridges online, a sign that Web retailers are posing a threat in areas of retail that were once considered relatively safe.

Called “My Subscriptions,” the service mirrors Amazon.com Inc. AMZN +0.41% ‘s Subscribe & Save program, which was launched in 2007 and has given the Internet retailer a foothold in sales of basic consumer products. Sam’s Club, a unit of Wal-Mart StoresInc., WMT +1.95% is launching the service as Amazon prepares to move deeper into the business itself.

Until now, warehouse clubs like Sam’s had been mostly insulated from the onslaught of online retailers like Amazon. Their main traffic drivers are fresh food, groceries and basic consumer products, which Amazon either didn’t sell much of or sold at higher prices than the discount clubs.

But that is changing as Amazon expands into those areas and builds similar customer loyalty. The Web giant’s $79 yearly Prime membership has grown to 35 million to 40 million households, according to estimates from analysts at Sanford C. Bernstein—rivaling the more than 47 million-strong membership base at Sam’s Club.

Rosalind Brewer, chief executive of Sam’s Club, told investors last October the company is watching Amazon closely, in part because Sam’s Club members are “really prone” to belong to Amazon Prime as well.

“The competitive landscape is shifting,” Ms. Brewer said. “It’s spanning from Amazon Prime, an online membership community, to the traditional warehouse clubs.”

Sam’s Club’s subscription service is a pilot program covering 700 items in categories like baby, beauty and office supplies, Sam’s Club spokesman Bill Durling said.

Shoppers don’t have to pay Sam’s Club’s shipping fees on subscription items, but won’t get additional discounts.

By contrast, Amazon’s Subscribe & Save program offers users up to 15% off depending on the order size.

“This isn’t a specific strategy targeted at Amazon Prime, but one of the ways we are looking to maximizeSamsclub.com and the intersection of bricks and clicks,” Mr. Durling said.

Tom Furphy, a venture capitalist who ran Amazon’s consumables, beauty and fresh food business, said the Web retailer plans to move deeper into consumer products with a new business called Pantry, which will allow customers to buy goods like toilet paper and cleaning supplies in bigger bundles and save on shipping costs.

Amazon spokesman Scott Stanzel declined to comment.

Sam’s Club generated $57 billion in revenue in the year that ended in January. Club store rival Costco Wholesale Corp. COST +0.36% generated $102 billion in sales last year. Analysts say online sales at both chains account for roughly 2% of total sales.

More than half of Costco’s and Sam’s Club revenue comes from sales of food and groceries. Currently, 35% of items sold at Costco can be found at Amazon, compared with 81% of items at electronics retailer Best Buy Co. that are also at Amazon, according to a William Blair study of 4,000 products, conducted last October.

“Food is very important to the club business,” said Mark Miller, an analyst at William Blair & Co. “As Amazon expands its food offerings, there’s going to be a bigger overlap going forward.”

In an interview last month Ms. Brewer, Sam’s Club’s CEO, said she viewed Samsclub.com as a “Prime-type model” and that expanding the company’s e-commerce operations was one of her top priorities.

To that end, the company hired former eBay Inc. executive Jamie Iannone, who most recently led Barnes & Noble Inc. BKS +4.23% ‘s e-book business, to lead the integration of Sam’s Club’s website with Wal-Mart’s global e-commerce unit in San Bruno, Calif. Previously, most of its operations were run out of its corporate office in Bentonville, Ark.