Sam's Club CEO: 'We have personality'
Despite parent company Wal-Mart's warning about tapped out consumers, Doug McMillon says he's not afraid to pitch a $347K diamond ring.
NEW YORK (CNNMoney.com) -- Wal-Mart CEO Lee Scott and his deputy, Sam's Club CEO Doug McMillon both say they are excited about the holiday shopping season.
But while Scott is touting deep discounting to drive holiday sales, McMillon is pitching pricey "once-in-a-lifetime" gifts such as a $347,000, 8.75-carat diamond ring or a $75,000 trip to the Beijing Olympics instead of discounted crates of Bounty and detergent.
"Our advantage is quality, and we have to step that up if we want our members to be happy and keep coming back," McMillon said in an interview with CNNMoney.com.
Wal-Mart's already resorted to two rounds of price cuts early in the season. But Sam's Club, unlike its bigger corporate cousin, is sticking to luxury appeal over price.
The strategy has worked in the past.
Last year, Sam's Club, the No. 2 warehouse club operator after Costco (Charts, Fortune 500), offered a $2.7 million Cessna jet for Christmas which sold in under a minute after it was listed on the retailer's Web site, he said.
"This is the fourth year that we've introduced these high-end gift ideas. Our members have responded positively to them," McMillon said. "It shows our uniqueness and lets members know that we have personality at Sam's."
It makes a lot of business sense too. If McMillon can entice Sam's Club small business and middle-income clientele to buy higher-quality products without hacking away at prices, the retailer can boost sales without sacrificing crucial holiday profit.
At the same time, McMillon's not dismissing price competitiveness entirely.
"We have to have price leadership but we also need more than price to win," McMillon.
Better deals later in the season
McMillon's confident that consumers will buy more holiday merchandise than last year even though the National Retail Federation predicts that 2007 holiday sales will grow at a slower pace than last year.
Said McMillon, "The NRF's numbers are what they are. At the end of the day, [we think] the amount of [sales] volume will be higher than a year ago."
McMillon said toys, flat-panel TVs and diamond jewelry will be among the hottest holiday sellers this year.
Wal-Mart and Sam's Club will debut their Black Friday deals the week of Nov. 19. The day after Thanksgiving kicks off the holiday gift-buying marathon.
"As TV prices continue to fall, we think the demand for LCD televisions will surpass plasma screens," he said. "Many people already have one flat-panel TV. This year they will pick up the second one, which is 50-inch or bigger, because the pricepoints are so attractive."
Early Christmas sales will be a little challenging, he said. "Between now and Thanksgiving we might not see electronic sales grow fast. People know that they'll get the best deals much later in the season. So they'll wait."
But is Sam's Club prepared for a late-season rush?
"We feel good about our inventory in electronics. We've been thoughtful about picking our suppliers and we placed out orders early," McMillon said.
Besides offering free breakfast to shoppers on Black Friday, McMillon said Sam's members can fax or e-mail their holiday lists at anytime and someone at the store will have the order ready for pickup.
In the future, he said the retailer was also exploring the idea of adding a personal shopper service to its membership program in which a Sam's Club employee would assist members with their entire shopping trip.
"We're not quite ready to talk about the new services that we want to add to make our new membership sign-ups more robust," he said.
Meanwhile, McMillon's ready to roll up his sleeves for the Black Friday rush.
"Every Black Friday I find myself visiting Sam's Club and Wal-Mart stores," he said. "It's amazing what happens at 5:00 a.m. once the shrink wrap is cut on the merchandise. Watch out for those elbows."
Which of Sam's "wow" gifts does he have his eye on?