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Tuesday, December 23, 2014

Sam's Club as an Economic Barometer

There's so many ways a person can judge the strength or weakness of the economy and often one's personal bias i.e. their hope for sunny skies data or determination to find the rotten apple in the barrel, gets in the way.

Some people will say things have never been better..

The Dow is at 18,000 which is an all-time high and the price of gasoline in some parts of the country are just under the $2/gallon mark meaning 15 gallons cost about $30 instead of $60 last year which is a big benefit for consumers.

We kinda of look at the state of the economy like this (all examples provided are true):

There used to be a time if you wanted to join Sam's Club, it cost whatever its annual membership fee was (currently $45 for basic membership) and that was that...  No breaks.. no discounts..

Then a few years back while entering Wal Mart, there was a Sam's Club table where for a limited time, if you joined, you got a free roaster chicken and vegetable tray..  carrots, celery, etc..

This was valued at $10

Earlier this year I found a coupon where you brought it to the front desk of Sams' and it entitled me to 30 free days membership with no penalty cost for purchasing items,
And last week, I received in the mail a coupon for a free year.. 12 full months membership. a $45 value, which was recently redeemed..

So what does that all mean?

Some may wish to look at it as well Sam's Club may be having some difficulties but it doesn't reflect anything beyond themselves..

And others may correctly look at it as Sam's falls under the Wal-Mart umbrella, the largest company in the US in terms of number of employees who are employed by a specific business.

1.4 million people to be exact
Sam's Club isn't your typical store.. Like Costco and BJ's Warehouse, they sell in bulk and not everyone has the financial means to pay for a year's supply of toilet paper, paper towels and such at a given moment..

And let's get beyond what would normally be at this point a myriad of facts and figures to look at it from a basic dollars and cents perspective..

If Sam's Club was thriving and profits soaring as the masses demonstrate with their purchasing power the  undeniable 'strength' of the "recovery"...
~ Sam's Club global presence

Would it have sent me (and many others we're sure) a coupon to be a full member for 12 months for nothing?   Not one penny...

What does Sam's have to gain by giving some people that kind of discount?

How about warm bodies walking around and shopping in their store..

Yesterday I joined and ended up spending $28 on some food items..

Now $28 isn't a lot of money But that is $28 More that Sam's Club took in yesterday vs if I wasn't a member and went elsewhere for my food.
And there's still another 364 membership days..  Certainly I will be going back and every time I purchase anything, that's more $$ than if I wasn't a member

So then the question becomes, why not do that with everyone?

Then Sam's loses its exclusivity..   Its a psychological strategy they employ.

For instance anyone can enter Costco or BJ's and walk around with their shopping cart..  You just need to be an active member to actually purchase something.   Then your receipt is checked before you leave, and then you're on your way..
Sam's is different..  They want to see your card as you enter the store.

Does it really matter since one can't buy without the active membership anyways?   No.. But makes people feel like they are privileged; like they possess status.

So is the economy really better as the media says, or is it still in the toilet?

Admittedly the super low gas prices skewer what would otherwise be a simple and clear answer..

$2 a gallon savings is nothing to sneeze at..
Basic math using 15 gal fill up per week means if everything stayed as is over a 52 week period, that's an annual savings of $1,560 in each person's pocket which is 6x any stimulus check the government ever sent out in the past..

For some people in hard times, that $1500 feels more like $15,000

So the gas prices represent the short-term bump, and if it stays this way into summer, then honestly one can say things are finally getting better for everyday people

But what we take from Sam's Club, is there's still a lot of economic hurt out there; a lot of belt tightening and the better the discounts stores like Sam's or Target or Macy's give out, the more desperate retail is to draw in shoppers.