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Sam’s is losing out to Costco, could react by selling more organics

Sam’s Club continues to struggle, but could outpace their primary competitor by relying on organic food sales.

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Costco is winning the discount race… for now

When you need to buy two dozen rolls of paper towels or five gallons of Mayonnaise, do you shop at Sam’s Club, or at Costco?

Recent first-quarter sales reports from the two wholesale buyer’s clubs indicate that Costco Wholesale Corp. is outshining Sam’s Club by significant margins. Sam’s Club, a wholesale division of Wal-Mart, saw a three percent drop in revenue and an 11 percent decline in operating income, while Costco’s sales increased by 4.4 percent, and revenue increased by eight percent.

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What’s more, Sam’s Club reports its net sales at $13.5 billion, less than half of Costco’s, which hit $27.5 billion for the period ending February 15.

How Sam’s and Costco differ

Executives at Sam’s and business experts agree that the product selection at Sam’s simply isn’t as diverse or appealing as the merchandise stocking the shelves at Costco. Brian Yarbrough, an analyst at Edward Jones tells Bloomberg, there is a “stunning difference” between the products – and the profits – of Sam’s Club and Costco.

Costco’s private label, Kirkland Signature products, makes up 20 percent of total sales, while Sam’s stores brands have failed to generate such significant profits. Rosalind Brewer, president and CEO of Sam’s Club, also admits that Sam’s has “opportunities for improvement.”

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The two brands enjoy different types of shoppers

The fact that Sam’s Club is declining while Costco continues to grow also reflects general trends in the retail economy, as well as the different customer bases of the two clubs. Sam’s lower-income customers are holding on to their cash in these meager times, while Costco can continue to count on its more affluent customers and small business owners to keep shopping.

According to Brewer, Sam’s merchandising teams will have to work hard on “bringing newness and trend-right merchandise into the clubs.” This is likely to include stocking the grocery section with more organic items, a move that might help Sam’s to attract a higher-income clientele and generate new interest in the club.

#SAMSvCOSTCO

Ellen Vessels, a Staff Writer at The American Genius, is respected for their wide range of work, with a focus on generational marketing and business trends. Ellen is also a performance artist when not writing, and has a passion for sustainability, social justice, and the arts.

2 Comments

2 Comments

  1. rob

    May 28, 2015 at 8:31 am

    I have memberships at both (this year) and I believe that this article fails to mention some aspects in this store comparison. I prefer Costco because it is cleaner, the staff smile more and seem to enjoy their jobs, the buggies and other equipment seem newer, the food court has better food, the staff is helpful and friendly, and it is a more comfortable environment to shop in. I tend to think that Costco might cost a little more, but the comfort level is well worth the extra cost. What other retail store can retain the same worker for eight years?

  2. CFB

    May 28, 2015 at 10:16 am

    Costco products are always top grade while Sam's aren't. The prices are often similar, although I can get some items at Sam's that are a little cheaper than Costco. I can buy gourmet foods on the cheap at Costco. Sam's doesn't sell that sort of thing. Sam's will often have one register open while 8-9 employees stand around near the customer service desk. I've gone to the food court and had the one guy working there be hiding in the back. If I return something at Costco, they often don't do more than ask what was wrong with it. At Sam's Club a return frequently is poorly received, requires a manager to approve or a department person to look the item over first. Its a lengthy and uncomfortable process. Once when checking out at Sam's Club, a boxed item was opened at the checkout "to make sure you didn't hide anything inside". Nothing like that has every happened to me at Costco.

    Products are a problem, the employees are a problem and the management of the stores are a problem. I still have a membership to both. Sam's Club basically gives memberships away for free, they do have some items Costco doesn't have, and Costco is always so busy I sometimes will just go to Sam's to avoid a crowd.

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