Sam’s Club Decides Coupons are Cool

One of the first things a new couponer learns is that buying in bulk is not necessarily the best way to save. Many shoppers may believe they’re getting a great deal at the warehouse stores, but you can often do better buying multiples of smaller items when they’re on sale and when you have coupons. Why pay 12 bucks for a 4-pack of toothpaste at Costco, when savvy shoppers know they can routinely get toothpaste for free at the supermarket or drug store?

Well, now one warehouse chain is jumping on the couponing bandwagon.

Sam’s Club has just introduced the second edition of its new “Instant Savings Book”, which promises more than $3,700 in discounts for members. If it sounds similar to Costco’s regularly-issued coupon booklets, it is. Costco has long offered store coupons and Costco-issued manufacturer’s coupons, while competitor BJ’s Wholesale Club accepts any type of manufacturer’s coupons. But Sam’s Club has done neither – until now.

Sam’s Club issued its first Instant Savings Book in May, and proclaimed it a resounding success. “The initial response has been very positive, and we are encouraged that over 50% of our members who shop during the event purchased an item from the book,” chief financial officer Michael Dastugue said during a recent investors conference. Offering a coupon for office chairs, for example, set off something of an office chair stampede. “In the first two days of the Instant Savings book we sold more office chairs online than we had in the three and a half months of the year prior to this,” Dastugue said. “So clearly it created an awareness with our members of items they probably were not familiar with.”

While Dastugue called them “coupons”, the offers in the book are more like instant savings, just as their name suggests. “No clipping, no rebates, no hassles!” Sam’s Club boasts, noting that the advertised discounts are automatically applied at checkout.

Some analysts caution the coupon strategy could be a risky one. Offering additional discounts on items that are supposed to be at a rock-bottom price already might send a mixed message. Why buy now, when you can wait to see if a coupon offer comes along in the next Instant Savings Book? That could train stock-up shoppers to start thinking more like bargain-hunting grocery store shoppers. Others believe there’s little danger of that happening among the type of customers who frequent warehouse clubs. Jefferies & Company analyst Dan Binder, who moderated the investors conference, called it “a unique way, in the club channel in particular, to create some buzz and excitement when you have sort of a dedicated shopper base that is not necessarily comparing prices every day against other retailers.”

Indeed, if they were comparing prices against other retailers, they might realize that even the coupons don’t provide a great deal in many cases. For example, there’s a coupon in the current Sam’s Club book for $2 off a two-pack of 27.5 oz. boxes of Honey Nut Cheerios. That knocks the price down to about 5 dollars, or $2.50 a box. Not a bad deal for the casual shopper, when such a big box would retail at most stores for more than $4. But many coupon users consider a stock-up price for a standard-sized box of cereal to be a dollar or less. Combining sales and coupons at the grocery store could get you those 55 ounces of Honey Nut Cheerios for at least a couple of bucks less than you’d spend at Sam’s Club – even with the Sam’s Club coupon.

But then club shoppers generally aren’t interested in doing the work required to get a deal like that. They want to get in, get what they need, and if Sam’s Club wants to offer them additional discounts, great.

Oh, and did we mention that the introduction of the first Instant Savings Book last month coincided with a hike in the Sam’s Club membership fees? The standard membership went up by $5, and business membership went up $10, both to a total of $45 a year. “There has been very limited pushback from our members,” Dastugue claimed. “They see that with things like the new Instant Savings book, that they’re getting a lot of value for their membership.”

So everyone is paying more, in order to save a little, and still end up spending more than they might at the grocery store. Sounds like a great deal – for Sam’s Club.