Sam's Club closures signal Walmart's giant step forward in e-commerce

front of a large sam's club store
Closing 63 Sam's Club locations is the first step in waking a "sleeping giant" in e-commerce, one analyst says. (Mike Mozart/CC BY 2.0)

Walmart has announced that it will close 63 of its Sam's Club locations, with plans to turn between 10 and 12 of them into e-commerce fulfillment centers. Like other competitors, Walmart is looking to better service its online consumers. 

A majority of the announced closings will happen in the next few weeks, and the first warehouse transformation will occur in Memphis. After the action, the company will have 597 clubs across the U.S. 

"Transforming our business means managing our real estate portfolio and Walmart needs a strong fleet of Sam's Clubs that are fit for the future," said Sam's Club CEO John Furner.

Nick Foy, chief strategy officer at ModusLink, a global provider of end-to-end digital and physical supply chain solutions, called Walmart "the sleeping giant of the e-commerce world," and referred to its latest move as a step toward waking that giant.

Walmart is attempting to keep pace with Amazon, and Foy believes that the big-box retailer has a fighting chance. 

"Walmart’s existing physical footprint gives it a key advantage over Amazon, which has recently been investing in physical locations to get product to consumers faster than ever. If Walmart can leverage this footprint, the opportunity is there for it to become a key e-commerce player," he told FierceRetail. 

But the move also signifies another step in the race against competitor Target. Foy said that Walmart and Target each have their advantages: Target has the strong omnichannel presence where stores are considered destinations and invite consumers to come in and experience the items they want to purchase, while its e-commerce allows for flexibility. 

Walmart, however, has the edge in terms of inventory, especially when it comes to groceries, a growing e-commerce market. 

So what does this move mean for the future of e-commerce? 

RELATED: Walmart puts its associates first

Foy pointed out that the way consumers shop has changed with the growth of e-commerce. It has moved away from monthly bulk purchases and toward making more frequent purchases of a few items at a time.

"Walmart’s commitment to e-commerce with this move is a good indicator that the market will continue to shift in this direction, and that Walmart is working to keep up," he added. 

In addition, Foy predicted that as e-commerce solutions continue to become more accessible to smaller brands, usage of these marketplaces will decline as brands look to remove the middleman. 

RELATED: Target becomes contender in omnichannel with purchase of Shipt

"All of these trends have one thing in common: The consumer is the true leader," he said.

And what about the future of the Sam's Club brand specifically? 

Foy said that ultimately the consumers will decide its fate. He noted that as consumers are purchasing less merchandise in bulk and trending more toward more purchasing fewer items more frequently, warehouse retailers are seeing a slow and steady decline. 

"However, due to the significant buying power of these brands, and the exceptionally low prices they are able to offer, parent brands like Walmart will likely be reluctant to retire the model completely, especially given the low rate of online grocery shopping in the U.S.," he said. "Additionally, given these stores are membership-based, closing them could mean a loss in important customer data, as well as a loss in customer loyalty."