Kath McLay maybe didn't have the luckiest timing in taking the reins at Sam's Club: She became CEO of Walmart Inc.'s smaller, $64 billion retailer in November 2019, months before the COVID-19 pandemic upended U.S. retail and everything else in American life.
But the former Woolworths Group logistics manager, who moved to the U.S. from Australia to join Walmart Inc. in 2015, has steered Sam's Club not just through pandemic tumult but also the expansion of Shop & Go instant-checkout technology in-stores and the culling of some private-label products that McLay said didn't meet Sam's Club member standards. Walmart CFO Brett Biggs had high praise for Sam's Club's performance and McLay's leadership at a Baird virtual event earlier this month and noted that both he and Walmart CEO Doug McMillon had come up in the company through Sam's Club.
McLay spoke this week at the virtual 2021 Jefferies Consumer Conference and shared what goes into the Sam's Club "secret sauce" and how the concept has continued to grow its membership in the past 15 months. What follows are several quotables from McLay from the discussion:
- On Sam's Club's strong performance in 2020 and into this year: "Members are getting into a stickier, more loyal relationship with us. And a lot of that is coming through some of the products and tech that we've delivered, which is, I think, truly living up [to] creating special experiences for members," McLay said. Sam's Club in the first fiscal quarter of the year saw membership income climb 12.7%, and total membership reached an all-time high, Walmart Inc. reported in May. Comp sales, too, were up 7.2%—higher than Walmart U.S. stores' growth of 6%. An unwavering attention to Sam's Club's value proposition and to ensuring that members feel "like they are getting extraordinarily great value for the money they spend with us"—through competitive pricing, through a laser focus on product quality and to flexible ominchannel shopping experiences—largely are responsible for this performance, McLay indicated.
- On the value proposition: "If you just look at data around renewal rates, we know, what are those triggers that will tell us that we have a high likelihood to get a great renewal outcome? And so we look at how many members are on auto renewal? How many members have our credit card and they're using it? How many members are using Scan & Go? How many members have an e-commerce account with us and are purchasing online? We've got the data that tells us by increment [whether a member is likely to renew]."
- On balancing automation and human talent needs: It was a year ago, McLay said, that Sam's Club debuted curbside service across the country, and it did so without increasing absolute headcount. "We stood up these fulfillment teams because we had deployed automation throughout the club," she said. "We had been able to use Scan & Go and people were using it more last year, and that enabled us to free up resources to put into that fulfillment team.
- On inflation: "We don't want to penalize our suppliers. We want a good business relationship with them that continues on. But we also don't want to just accept prices and pass it through to the members as well, too. So it takes a little bit of negotiating and hard work and still creating work to be able to find cost savings to be able to manage through all of that."
- On being an innovator and an incubator within and for the Walmart enterprise: "We've got all of these wonderful kind of capabilities and apps which have great machine learning and AI sitting behind them that have enabled us to be highly productive in the clubs. ... There are things like that we're playing with ... even for the member, they'll no longer have to scan the barcode on the product because their phone can just recognize, well, that's a packet of Doritos. So it's, how do I take friction out for the member? And then how do I make sure that I'm making my associates' jobs easier and more productive? ... I think the Sam's Club team is highly innovative. They have worked hard to use AI and machine learning to really supplement and augment the associate on the floor. And I think it's part of [our] secret sauce."