Sam's Club jumps into auto sales with TrueCar tie-up

Reuters News
Posted: Sep 03, 2015 11:12 AM

By Nathan Layne

(Reuters) - Sam's Club, the warehouse division of Wal-Mart Stores Inc, has tied up with online car-shopping service TrueCar Inc to make a full-fledged foray into auto sales, a fast-growing business for rival Costco Wholesale Corp.

Until now Sam's Club had allowed a third-party auto-buying service to market cars through its website but had not operated its own program like Costco, which has quietly grown into one of the biggest players in the industry, selling nearly 400,000 vehicles last year.

Sam's Club said on Thursday that its new program would give members access to more than 10,000 TrueCar dealers and guaranteed savings off the manufacturer's suggested retail price for new cars as well as deals on used cars.

The company did not disclose sales or other targets.

Seong Ohm, senior vice president of merchandise business service, said the company did not expect to make money on the service but believed it would emerge as a key driver of membership. Sam's and Costco both make the bulk of their profit through membership fees.

"We are not extracting value other than membership," Ohm said. "We think this is going to be a really great program, but we also recognize it is going to take some time to scale up."

A basic annual membership at Sam's costs $45. Sam's has 653 stores in the United States and Puerto Rico.

Sam's foray into the market reflects growing interest among consumers in obtaining the best price on a car without haggling. It cited a recent survey by J.D. Power and Associates showing that two-thirds of "millennials" - those born between 1980 and 2000 - view buying a car as one of the most intimidating purchases they can make.

Sam’s service will allow shoppers to see what others paid for the same car "so they know if they are getting a deal or not,” Ohm said.

The program is among 10 new or relaunched services at Sam's in the past year. Sam's comparable sales rose 1.3 percent in the latest quarter minus fuel, but it has recently lagged behind Costco and is looking for ways to ignite growth.

Edward Jones analyst Brian Yarbrough said the car program would likely do well but that Sam's needed to improve its merchandise and services to catch up with Costco.

"It may help them close the gap on the car-buying side versus Costco but as far as the issues with the rest of the store, those have yet to be fixed," Yarbrough said.

(Reporting by Nathan Layne in Chicago; Editing by Matthew Lewis)