Wal-Mart Stores Inc. will cut about 11,200 jobs at Sam's Club warehouses as it turns over the task of in-store product demonstrations to an outside marketing company.
The move is an effort to improve sales at Sam's Club, which has underperformed the company's namesake stores in the U.S. and abroad.
The cuts represent about 10 percent of the warehouse club operator's 110,000 staffers across its 600 stores. That includes 10,000 workers, mostly part-timers, who offer food samples and showcase products to customers. The company also eliminated 1,200 workers who recruit new members.
Employees were told the news at mandatory meetings on Sunday morning.
"In the club channel, demo sampling events are a very important part of the experience," said Sam's Club CEO Brian Cornell in a phone interview with The Associated Press. "Shopper Events specializes in this area and they can take our sampling program to the next level."
Shopper Events, based in Rogers, Ark., currently works with Wal-Mart's namesake stores on in-store demonstrations. Sam's Club is looking to the company to improve sampling in areas such as electronics, personal wellness products and food items to entice shoppers to spend more.
Cornell has been working to boost Sam's Club's results since taking the helm in early 2009, introducing new store formats, price cuts and offering more variety and more brands of items from take-home meals to baked goods.
As consumers eat out less in the shaky economy, Sam's Club has tried to steal customers from grocery chains and rival warehouse stores like Costco Wholesale Corp. by offering more everyday goods like food and health and beauty items and paring its assortment of general merchandise like furniture and clothes.
But during Wal-Mart Stores' most recent quarter, revenue at the Sam's Club division slipped nearly 1 percent to $11.55 billion while U.S. Walmart stores posted a 1.2 percent sales increase to $61.81 billion. Earlier this month, Wal-Mart Stores closed 10 underperforming Sam's Club locations, resulting in the loss of about 1,500 jobs.
"Sam's has been the relative laggard, and it has lagged relative to its direct competitors, Costco and the smaller BJ's (Wholesale Club)," said Craig Johnson, president of retail consultancy Customer Growth Partners.
The move to outsource its food sampling efforts is a way for the company to tout its fresh food offerings in a cost-effective manner, Johnson said.
"'Fresh' is where the real competitive battles are being fought in the club sector," he said.
Shopper Events will launch a new demo program called "Tastes and Tips" with new carts, signs, uniforms and a trained team, said Cornell. He said the move was not made to save money.
"It's not a cost cutting measure, its really an investment in enhancing our demo program," he said. Cornell added that Shopper Events plans to hire "roughly the same number of people" cut, and said Sam's Club workers are invited to apply for those positions.
Cornell said Sam's Club decided to eliminate its membership recruiting unit because "we have found that we can more effectively drive membership through targeted member acquisition events and by increasing our partner membership programs."
"I feel betrayed," said Sally Grueling, 56, who had worked at Sam's Club for nine years, most recently in Hilliard, Ohio as a new business membership rep.
In a memo to employees, Cornell said eligible workers will receive severance pay and benefits, and that the company will help them find opportunities at other Sam's Clubs and in Walmart stores, in addition to Shopper Events positions.
The cuts come as many Americans had hoped job losses would be slowing as the economy slowly recovers. However, analysts said Sunday that while this marks Wal-Mart Stores' largest job cut, they expect many employees to be picked up by Shopper Events, so the net effect on the economy probably won't be that bad.
"I would argue that from an economic standpoint it's somewhat nominal," said David Strasser, a retail analyst with Janney Montgomery Scott. "It looks a lot worse than it really is from a layoff standpoint. My read is the majority of employees are going to be picked up by Shopper Events."
Strasser said he did not expect the move to materially affect Wal-Mart Stores' fourth-quarter earnings results. Wal-Mart reports results for the quarter and full year in February.
"It really should be neutral to the economy," Johnson agreed. He said Wal-Mart remains the largest private employer in the world and in the U.S. "None of that changes."
The number of jobs created via Shopper Events may not be one-to-one, he said, "but should be fairly close. Net net I don't think it makes a huge difference on the economy."