Sam’s club adding distribution centers to speed up online fulfillment

The warehouse-club chain, owned by Walmart, plans to open up to 16 facilities over the next five years

Sam’s Club is expanding its supply-chain network as it looks to build on recent e-commerce sales growth by speeding up order fulfillment while cutting shipping costs.

The Bentonville, Ark.-based warehouse-club chain, owned by Walmart Inc., said it would open five new highly automated fulfillment centers this year, and about 14 to 16 warehouses in total over the next five years, as well as upgrade its existing warehouses.

The retailer also plans to open 30 more stores that will include space to handle more e-commerce orders.

Sam's Club

HOUSTON, TEXAS - JULY 21: A customer stocks up on bottled water in a Sam's Club during a heatwave on July 21, 2022 in Houston, Texas. (Photo by Brandon Bell/Getty Images) (Getty Images)

Sam’s Club said its plan is to shrink the average distance between its supply-chain facilities and its stores and members.

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"We really need to evolve the supply chain to match that future growth and continue to double down in creating that fantastic experience for our members," said Joseph Godsey, chief supply-chain officer for Sam’s Club. 

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The new supply-chain facilities will add to the retailer’s network of about 55 warehouses. The fulfillment centers will be able to ship orders directly to customers, while other new facilities will also stow what the retailer calls ambient items, which have a long shelf life at room temperature, as well as replenishing stores.

Sam’s Club reported its net e-commerce sales grew 21% for the quarter ended Jan. 27 compared with the year-ago period, driven by curbside pickup and orders shipped to customers’ homes. Comparable sales, those from stores and digital channels operating for at least 12 months, rose 11.9% from a year earlier. 

Costco

Shoppers make their way through Costco in Idaho Falls, Idaho during its opening day on Friday, August 14, 2020. (John Roark/The Idaho Post-Register via AP) (John Roark/The Idaho Post-Register via AP / AP Newsroom)

Sam’s Club has been working to attract more-affluent shoppers in recent years as it competes with rival warehouse chain Costco Wholesale Corp. That has included reshaping its footprint by closing some stores and opening new ones elsewhere to get closer to members. The retailer today has about 600 locations in the U.S. and Puerto Rico.

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The retailer has been expanding its in-store fulfillment options to accelerate online order delivery. It began using Walmart’s GoLocal delivery platform in 2021 for same-day delivery to customers who live near a store. Sam’s Club said it is designing its new stores to have more space for curbside pickup and delivery orders. 

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The new warehouses will complement that store network, Mr. Godsey said. Having new warehouses and stores closer to customers will also cut down on shipping costs, he said.

"The closer we get to the member, you drop the total distance traveled, whether that’s a big and bulky product or parcel delivery," Mr. Godsey said.

Many retailers have been working to build out their fulfillment networks to get products as close as possible to customers to increase delivery speed, said Tom Enright, an analyst at research firm Gartner Inc.

"That’s the game that they’re all trying to go after is, how can I ship in bulk as far as possible and ship in fragmented elements as short as possible?" Mr. Enright said.

target

Target Shopping Cart (iStock / iStock)

Target Corp. last week said it would spend $100 million to expand next-day delivery by opening at least six more sortation centers across the U.S. over the next three years.

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The first new Sam’s Club fulfillment center is expected to open near Atlanta in the third quarter of this year. Mr. Godsey didn’t disclose where the other four facilities opening this year will be located, nor the total amount the company is investing to upgrade its supply chain.

The warehouses will include technology that automates inbound processes, picking, packing, shipping and sorting, Mr. Godsey said, and will be outfitted with "near full automation of what you can create in today’s technology." 

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About 100 employees will work at its ambient facilities and about 1,000 at fulfillment centers. Mr. Godsey said Sam’s Club will employ the same number of people it would have without automation so it can handle more volume.