How Sam’s Club is using 50,000 customers to create new products

Customer collaboration has a long history in product development, but Sam’s Club is taking it to a scale that may be unprecedented. The smaller if still giant sibling of Walmart has enlisted 50,000 of its members into its Members Mark Community customer collaboration platform, and now is opening things up to the chain’s entire membership base. Beyond helping Sam’s Club come up with ideas and evaluate new products, the retailer also is encouraging community members to take videos of preview versions of new products that they can post to social media to help stoke buzz. Ad Age Small Agency Conference & Awards Join us July 23 & 24 in Boston Learn more here It’s part of a newly energized private-label program for Sam’s and its big sibling Walmart. They’ve long had giant store brands by virtue of being the biggest retailer in the U.S. For example, Walmart’s Great Value is billed by the company as the single biggest brand in U.S. grocery. Overall, private label accounted for 26.4% of Walmart U.S. grocery sales in the year ended March 31, according to Numerator, which amounts to $68 billion in annual sales. But supplier executives privately have long compared Walmart’s private labels unfavorably to such brands as Costco’s Kirkland, Kroger Co.’s Simple Truth and Trader Joe’s nearly all-private-label assortment in quality and innovation. Now, that appears to be changing fast. Beyond Member’s Mark, Walmart in April began rolling out a new private brand, Bettergoods, focused on natural, plant-based and other better-for-you ingredients combined with gourmet touches, such as frozen Italian Woodfried Mushroom and Truffle Pizza sourced from Italy, beef bulgogi empanadas and oat milk blueberry swirl ice cream. Early customer reaction is promising according to Numerator, which through its consumer panel, provided an early read last month based on the first wave of 38 Bettergoods items, finding 78% of buyers of the brand’s ice cream plan to repeat, and 71% didn’t know it was owned by Walmart. Also, Bettergoods fans tended to over-index as Gen Z. Member’s Mark transformation While Sam’s Club generally gets less attention than the Walmart chain, its private-label program quietly has undergone a much bigger overhaul in the past five years. The Member’s Mark Community that the retailer has quietly been building is helping power that transformation, and the retailer’s executives went public about it during Walmart’s Associates Week in Bentonville, Arkansas, last week. Member’s Mark, once a heavily price-focused brand, is now about value—the mix of quality and price—said Myron Frazier, senior VP of private brands and sourcing at Sam’s Club. “We have a big aspiration to be a true lifestyle brand that clothes you, feeds you, styles your home, cleans your home and so much more,” he said. To that end the retailer in 2019 began consolidating more than a dozen private labels into Member’s Mark, which now accounts for 30% of the club chain’s sales, or nearly $26 billion, he said. Member’s Mark is a key part of the retailer’s goal to double revenue, which last year was $86.2 billion, said Megan Crozier, executive VP and chief merchant of Sam’s Club. One thing driving growth lately has been the Member’s Mark Enzo Bookcase, which she said has gone viral on TikTok (with 619,000-plus views of one video from the brand, and many related videos about people sharing stories about finding or looking for the $599 bookcase, which has been hard to keep in stock.) @samsclubmembers If you didnt score the first time around, NOW IS YOUR CHANCE!! LINKED IN BIO to See if your club has it in stock at this very moment! Follow samsclubmembers on IG for more Sam's Club Finds! #samsclub #samsclubfinds #samsclubmusthaves #enzobookcase #samsclubdeals ♬ original sound - KN Driving Member’s Mark’s secret sauce is input from members in product development, Crozier said, which is often more about asking them about the biggest challenges they face, not just directly fishing for product ideas. Case in point was hearing that one of the biggest annoyances parents face is getting their kids dressed in the morning in matching clothes, then developing a line of kids’ apparel where everything matches. To get such input, Sam’s has built the Member’s Mark Community, sometimes using purchase data to find enthusiasts for particular product lines such as wine or outdoor grilling, and then using their input to shape product offerings, Frazier said. An example was development of this season’s Member’s Mark grill. The product team identified avid grillers through a questionnaire, then distributed 20 prototypes to members in the Dallas-Fort Worth area, who tested the grills, took videos of their experiences and reviewed them. Their feedback led to adjustments in features for the launch this spring. See Ad Age’s Tech Power List honoring marketing leaders “Sam’s Club is pushing the boundaries of retail … with customer engagement strategies designed to get to the promises of collaborative commerce,” R. “Ray” Wang, CEO of advisory firm Constellation Research, said in a statement. While marketers long have sought consumers to collaborate in product development, the Sam’s Club program already operates at what appears to be an unprecedented scale for such a program by any one marketer. Beyond product development, it also creates an opportunity to use the community for social media marketing. “You’ll continue to see more user, member-generated content,” Frazier said. “That’s part of how we think about the community.” It’s taken a little over three years to recruit the 50,000 members, he said. “We have a really high acceptance rate and an even higher retention rate.” Walmart’s push for ‘Better’ For Bettergoods, listening to what shoppers want has also been a big part of building the brand, said Scott Morris, senior VP of private brands for food and consumables at Walmart. Unlike the more entry-level-price focused Great Value, Bettergoods is far more focused on culinary innovation, not duplicates of existing national brands. It’s a combination of better-for-you propositions such as plant-based products with novel recipes and certified ingredients. That includes a Hatch pepper flavored corn chip where the peppers really are certified as Hatch by growers in New Mexico. Bettergoods also includes empanadas, something shoppers certainly won’t find from Great Value. Walmart launched an apple empanada as a familiar hand-held apple pie for people unfamiliar with empanadas, while also moving things forward with novel recipes such as beef bulgogi, said Denise Wright, senior private development manager for private brands at Walmart. Launched in April with 38 items, Bettergoods will grow to a broader assortment of 300 items across numerous categories in most U.S. stores by August. While high-end compared to Great Value, 70% of Bettergoods items will be priced under $5. Morris said he was surprised by Numerator’s early read only two weeks after Walmart launched Bettergoods but happy with the results, which included showing that 10.7% of Bettergoods ice cream shoppers are Gen Z, well ahead of the 6.4% for Great Value. Numerator also found low-income households were 34% more likely to purchase Bettergoods than Great Value, with high-income homes 20% more likely. While strength with Gen Z is promising, Bettergoods is really about serving all age cohorts, Morris said. It springs from hearing that shoppers wanted something better than they’ve been getting from Walmart private label. “Some of the sound bites have been that ‘We want to make sure we have culinary innovation and things that are going to inspire us to cook at home,” he said. “But we also want healthier foods and cleaner products.” Still about brands Compared to prior years, Walmart spent a lot more time talking about its private-label products than new brand products and showcasing its investment in its own brands when it invited investors and media to Bentonville. So should brand marketers be worried? Not really, said CEO Doug McMillon in a press conference. Brand marketers are “going to do what you need to do, whether it’s innovation or price, to earn the business,” McMillion said. National brands remain important to Walmart, McMillon added, “because we want customers to compare price, and that’s harder to do with private brands.” Personally, he’s a big fan of Member’s Mark cashews, and shoppers are showing an affinity to Bettergoods, he said. “But we still want to sell Coca-Cola. We still want to sell Frito-Lay. And we still want people to compare price. So we’ll lean toward brand. But if you’re going to have shelf space … why not be great at private brand at the same time?”

How Sam’s Club is using 50,000 customers to create new products

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