Sam's Club 'WOW' gifts: diamonds and jets
Wal-Mart's warehouse club unit hopes its 'affordable luxuries' will bring in new customers; some analysts question the move.
NEW YORK (CNNMoney.com) -- Facing stiff competition from rival Costco, warehouse club operator Sam's Club is hoping to bring in new customers beyond its main small business clientele by selling more "affordable luxuries" like pricey diamond baubles and a $2.7 million jet.
While the company is still committed to its small business member customers, Sam's Club is making a concerted effort to broaden its appeal to retail customers as well, executives from Sam's Club, a division of Wal-Mart (Charts), told analysts on the second day of Wal-Mart's two-day analysts meeting in New Jersey.
The presentation was monitored via Webcast in New York.
To signal that change in strategy, Sam's Club has refreshed its logo and eliminated its tagline "We're in business for small business." But the move is already causing some concern among industry watchers.
As sales at Wal-Mart and Sam's Club stores open at least a year - a key retail metric also known as same-store sales - continue to trail behind those at main competitors Target (Charts) and Costco (Charts), both Wal-Mart and Sam's Club are trying to bridge the gap by expanding their shopper base.
Wal-Mart over the past year has courted mid to upper-income shoppers by introducing better-quality and more expensive items like flatscreen TVs, higher thread-count bedsheets and organic food and clothing products.
Sam's Club strategy mirrors Wal-Mart's move. However, instead of aiming just a couple of notches higher with merchandise quality, Sam's Club is shooting sky-high by adding what it calls "affordable luxuries" to its product mix.
For instance, the company introduced a line of premium gourmet organic coffee.
Customers can pick up a Godiva chocolate gift set that comes in a porcelain container or some Black Diamond Platinum Reserve Cheddar cheese which has been aged four years and is sold exclusively at Sam's.
Sam's is set to unveil its 2006 holiday catalog on Nov. 1. Among the "WOW" gift options is an 18 carat Tanzanite diamond necklace priced at $28,000.
For a once-in-a-lifetime gift, the company is selling a $2.7 million Cessna jet or 280 tickets valued at $2,400 for a special prescreening for the upcoming Warner Bros. movie "Marshall University."
Mark Husson, an analyst with HSBC Securities, said Sam's Club already has a good small business franchise. To shop at Sam's Club, customers must be members. The company has three types of memberships: Business membership, Advantage membership for retail customers and a premium membership for both Business and Advantage clients.
According to the company, Sam's Club is struggling to grow membership among its retail or "advantage" customers.
Said Husson, "This indicates that perhaps Sam's Club's retail shoppers are more price-conscious than Costco shoppers. If that's the case, where is the advantage in selling more high-end stuff? We'll have to see how this strategy resonates with these shoppers."