2 Reasons Why Costco is Hammering Sam’s Club

When it comes to membership warehouse stores, it appears Costco is king.

After laying off 2,300 workers in January, Walmart-owned Sam’s Club recently reported dismal first-quarter earnings, while Costco netted $463 million in profits. Costco’s latest numbers trailed Wall Street expectations, but they were a far cry from Sam’s Club’s 0.5 percent drop in sales.

The Huffington Post said:

“The divergence from Costco is striking, because they’re basically in the same business — but apparently they’re not in the same business,” said Faye Landes, a senior research analyst at the Cowen Group, a financial services company. Sam’s Club, said Landes, doesn’t “seem to have it quite right.”

According to HuffPo, there are two big reasons Costco is crushing its competition:

  • Knowing your customer base. Sam’s Club reported that its recent earnings suffered as a result of declining public assistance for poor customers. If Sam’s Club is banking on sales to customers who need food assistance, Landes said, “it’s not clear if they have the right merchandise for that consumer.” Costco targets consumers with more income, HuffPo said.
  • Customer loyalty. While it appears that Sam’s Club is losing customers to Amazon and even Walmart, Costco customers are loyal, with a nearly 90 percent membership renewal rate. In addition, HuffPo said Costco’s Kirkland brand is a pull for customers.

Cleveland’s WEWS TV recently reported that Costco beat Sam’s Club on the price of more than 20 common items, including detergent, food and baby products. Costco never marks anything up more than 15 percent, HuffPo said.

Costco is also the clear winner when it comes to employee wages. As we discussed here, Costco pays its workers an average of $20.89 per hour, compared with $12.67 at Walmart.

I live 90 minutes from a Sam’s Club and three hours from the nearest Costco. While I shop as often as possible at Costco without making a special trip to do so, I’ve only been to Sam’s Club once. Not only do I prefer the quality of Costco’s goods, I’ve also enjoyed unrivaled customer service at Costco.

In addition, I’m more willing to support a business – like Costco – that treats its employees well.

Do you shop Sam’s Club or Costco? Share your comments below or on our Facebook page.

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Comments & discussion

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  • JKH

    We have a Sam’s in the town I live in. I can’t tell you how many times I try a product, like it, and then can’t find it there six months later. So I go elsewhere to find the product that I like.

  • Andres Garza

    While I may vehemently dislike their socialist politico base, Costco is my store. My children prefer it to ToysrUs or even Chucky Cheese. They understand economics and the four are all under twelve years of age. I quit SAMs about a decade ago and I waited for Costco to open up here in South Texas. And like the writer, I drive 30 minutes through traffic each way versus walking half the time to the news SAMs in my city.

  • nitemare2

    Krystal you bring in the wages which really have nothing to do with the shopping except to the liberals and union whiners. Why did you even bring that up. The Main reason for the difference is in your first statement of “Knowing your customer base” Wal-Mart caters to a lower income based client. Costco is the higher priced spread. You always try and blame it on the wages, everything is about the wages to you and the liberal whiners. It also so said with the amount of new Wal-Mart stores opening it is taking customers away because they no longer have to buy in bulk. And Stacey are you again going to tell me Krystal is not bias? Are you going to tell me she just reports what she finds? Block me ban me, what ever you want but the truth is she is a liberal/progressive and all her articles show that.

    • Pointtaken

      Nitemare2
      I’m not sure how one payroll fact got you so upset. I looked at the same sentence and thought, Costco is doing well and they are passing on their success to their employees. If you look at every story through a prism of Liberal or Conservative your going to have an aneurysm :)

      • nitemare2

        I’m not sure why she used it. It has nothing to do with the article saying Costco is “crushing” Sam’s. Most of her article is straight from the liberal Huffington Post, but how about looking at Forbes “Wal-Mart’s Sam’s Club U.S. comparable store sales fell by 1.4% primarily due to a 1.8% decline in store traffic. The main reasons were the delay in tax refunds, a 2% payroll tax increase, prolonged cold weather and a lower-than-expected increase in grocery prices. Tax refunds this year were delayed due to the year-end complications related to the fiscal cliff. As the IRS delayed the filing process by 15 days, refund checks came later than usual.” Another thing she forgot to tell you is the net profit for the 2 was within .5% Costco was also disappointed with it’s market share. Costco has less employees per store then Sam’s or at least it did until Sam’s laid off some people about half of which were management. Every story here is liberal or conservative. Stacey has Krystal who does the liberal side and then he used Dave Ramsey articles for a conservative slant the same day. Aneurysm really why because I challenge the writer of an article? I have been told several times by Stacey that Krystal’s articles are completely unbiased yet she continues to quote from liberal sources and gives no opposing views. So I figure he will ban me or block me for my opposing views.

    • Jack Mabry

      Since when did a company taking care of it’s employees become a liberal idea. I believe it to be a very smart company move, less turnover, happier employees, better customer service. Seems like a win, win for everyone. Suggest you come out from under your rock, and enjoy the sunshine.

      • nitemare2

        And again I ask what the wage has to do with the article? Your Idea that just because they have better pay means nothing to the fact that Costco caters to a different more affluent client. She says she will travel farther and longer after 1 trip to Sam’s. Really if I am going to purchase a membership I plan on giving it more then 1 trip to decide. What kind of customer service problems did she have, what kind of item was she buying. I have never had a problem with customer service at the local Wal-Mart. I do not buy in bulk been to Costco several times the same with Sam’s and it does not save me money so I shop at the local the local Wal-Mart. Now for you to use the liberal talking point of Wal_Mart not taking care of their employees you should look at some facts Krystal will never give you. 75% of all managers have started as part timers. Lets look at Walmart versus Target in employee bonuses. Walmart is much more generous, offering its assistant store managers $2,948 as opposed to Target’s $2,457. Store managers at Walmart get a whopping $9,958, nearly double Target’s $4,880 for the same job. Greeter/Floor Sales Representative,Target: $6.77 – $12.06 per hour Walmart: $6.98 – $12.18 per hour, Target: $60,960 per year
        Walmart: $65,326 per year. As for the Sam’s read this article from someone who compared both stores and said the people at Sam’s were always friendlier. “It could be just our Costco, but I always feel like the cashiers don’t want to be there. They hardly ever make eye contact” http://www.clarkscondensed.com/thrifty-living/costco-versus-sams-club/. Krystal makes no comparison. I think you are the one under a rock of liberal info.

        • tcidda

          Numbers though have a funny way of telling people what the company wants to tell people.Not saying they aren’t truthful but sometimes they may not be all they seem to be.

      • tcidda

        I agree companies should take care of their employees but having said that from a pure money making point of view Wal-Mart certainly has been successful.

  • Jim A

    Here’s my rub with Sams- black olives come only in a gallon can but Costco has an 8 pack of smaller cans which are much better for the small user to use…..Ketchup same thing- Sams has only a gallon can/Costco has a two jug pack. And yes, Costco prices are better for sure.

  • William E Hanson

    When Costco opened their warehouse here in Winston-Salem, NC, they offered a 1-year free membership to us through our credit union. We already had a Sam’s membership, but was thrilled at how much nicer the merchandise were at Costco. We also quickly noticed that the associates at Costco were all smiles and friendly, while the ones at Sam’s were “bitching and moaning”. Regardless, we maintained dual memberships for years until we realized that we hardly ever shopped at Sam’s anymore and dropped it when we tried to get Sam’s to make good on a “Life-Time Warranty” on a product; they wouldn’t, so we cancelled our membership right then and never looked back. The article is correct that Costco caters to the economically-stable consumer with discriminating taste, while Sam’s aim is to the price-conscious crowd. With everything aside, any business who doesn’t provide excellent customer service, is going to suffer with the economy.

  • ModernMode

    “Sam’s Club reported that its recent earnings suffered as a result of declining public assistance for poor customers.”
    Where does someone on public assistance get the money to buy a Sam’s Club membership?

  • Michael Smiley Gawthrop

    I may be in the minority, but I much prefer Sams… at least locally. Every time I have been to Costco they have had long lines (15 minute wait last time I was there and that was a short wait for that location), been overcrowded (takes nearly ten minutes to make it from front to back because of how many people you have to get around), and been overpriced (well, yes, for what they are selling it is a good price, but seriously, I don’t need all organic produce, it’s a good price for all organic, but I can get traditional for cheaper even at an expensive grocery store, yes I guess the toilet paper is higher quality but let’s be honest, it’s going to wipe my bum, it doesn’t need to be amazing it needs to be functional, etc). The nail in the coffin for them that got me to switch to Sam’s Club is when they admitted that they had no intention of fixing the overcrowding problems by opening a new store because they had determined that despite being the second fastest growing county in the state, there was no need to increase their presence.
    The one good thing about them that would get me to go back if they were to get over their need to only offer the finest of products and would fix their crowding problem is their employees. Yes, how much you pay your employees makes a difference, you can tell that these are people who are experienced, have been there a while, and actually care about the job… and I can’t say I blame them, the company is taking care of them so they want to take care of the company. Completely different experience than being helped by a minimum wage drone who only cares enough to not get fired and again, can’t blame them, the company is giving them the minimum amount of help and that is what the company is getting in return… you get what you pay for.

  • Gary Masters

    I am a Costco member now because it is closer to my home. But I have been Sam’s Club member and can not see any difference at all in the two stores. Now the Costco people do help more at check out. But other than that thee is no service that I am aware of.

  • Caroline H

    Unless it just a plain nasty store franchise, there will be excellent, good and bad stores for ALL business’s. I live in Tulsa, OK, I’ve shopped at Wal-Marts in Tulsa and have wanted crown some employee’s and not with many crowns. Have also shopped at the Owasso, OK Wal-Mart and have always had great service, employees coming up to you, asking if you need help. They should send all employees from all stores in Tulsa out there for training. I currently shop at the Wal-Mart in Sand Springs, OK, they are a mix between Tulsa/Owasso. lol Have been to Sam’s Club here in Tulsa and again sort of a mix, some help and some glare. lol We have no Costco here, but years ago did shop at one out in I think Oregon. But so long ago, really don’t recall their service and such. I’m on a fixed income and so I do go for the “value” as I must stick with a budget not only for food but other items as well. So keep in mind, sometimes it is “your attitude” as well, that can also cause good or bad service from anywhere.

  • Tom

    Costco has a well-earned reputation for treating both customers and employees right. The Kirkland brand is high quality and their prices on name brands are excellent. Great meats and veggies. I sometimes question the price of the executive membership and our need to buy in bulk, but I keep up the membership because of product prices and the fact that my annual rebate more than offsets the membership costs.

  • Shamoor

    Have you ever been to Sam’s Club on a busy weekend? The check out registers are never fully staffed and the wait on line is at least 20 minutes. I think it’s horrible that they can’t even man the registers on busy weekends. Same is true at Walmart.

  • prernadua

    Oh yeah, costco all the way. Their buying department seems to have a much better grip on the needs and tastes of their target customers, they have great prices, and their employees are always smiling and helpful. In 4 years of twice a week trips to costco, I have never encountered a disgruntled employee or customer. Sam’s club just doesn’t have that feel to it, the products don’t really hit the bullseye and the staff is not as welcoming. I’m completely a costco loyalist!

  • Lorilu

    Costco’s merchandise is high quality, and if you don’t like something, there is never a problem when you return it. The stores are clean and well stocked. If you live near a Costco, just the savings each week on staple products like milk, eggs, butter, etc., will pay for the membership. The executive membership entitles you to discounts on other products, and you also get 2% back on your purchases. Most of the time, the cash back pays for the membership.

  • tcidda

    I would say i have been in neither in quite awhile but from what i’ve read and heard Costco does things right whereas Sams Club is nothing more than Wal-Mart in a different form.Warehouse shopping makes very little sense for me because i buy only for me so i don’t need 4 boxes of toothpaste or six packages of frozen waffles etc.,etc.,etc..One or two will do fine and i can get those at Wal-Mart or regional discounters within 2 miles of my house instead of traveling 30 miles to the warehouses.Having said that i understand it pays for large families to shop at warehouses providing the distance is reasonable to the stores.

  • ManoaHi

    I have both memberships. In Sam’s Club, I have the Advantage membership and at Costco I have the Excutive account. Unless you count the cashback for membership as well as Amex, I find the prices at Sam’s Club to be a bit lower on the exact same items., even gas is a bit cheaper. I’m not sure about how things are done in other areas, but the two Sam’s Clubs and two Costco that are not that far apart (both are about 12 miles from like store to like store, both Sam’s Clubs are fully stocked, much, much cleaner, aisles that are labelled (instead of Costcos’ number labelled aisles) make it esasier to find things. Costco generally has way more empty shelves, which I find annoying. Costco no longer has the cards nor hours that allowed some to get in earlier. Sam’s still does have extended hours for Advantage members. My main reason for having Costco is that I am now located about 3 minutes walk from one of the Costcos. I have my lunch from Costcos at least once per week and often browse the aisles. Costco does seem to have more of the vendors visiting the stores and at those times, their items are at reduced prices. But that is because I can go there as much as I want, so I don’t know if the same is happening at Sam’s. That Sam’s opens at 7:00 A.M. for us Advantage members, is a huge bonus, whereas the Costco that I can see out my window, is not open until 10:00 A.M. no matter what your membership is. Until my company moved to near Costco, I let my membership lapse. From home Sam’s is more convenient and way less crowded. I find that finding an associate is pretty much the same, both are difficult. Lines are shorter at Sam’s including the gas. Sam’s membership fee is lower than Costco’s.

    I agree that employee pay has nothing to do with this, and it is NOT Krystal’s mainpoint. Two reasons (althought not her own, HuffPo’s – I generally hate HuffPo’s liberal bent), and employee pay was not one of the two points. The two points were “Knowing your customer base” and “customer loyalty”.  I did note that Sam’s seems to be top heavy and I think that is their problem, and if they corrected that, it does bode well for Sam’s. I have seen the managers congregating and generally seemed unconcerned with how the store was working; one day I couldn’t find an associate, and I saw the assistant manager. I asked him were something was, he said he didn’t know and started to walk away. I said “nice attitude, thanks for being completely unhelpful” and he turned around to chew me out for “bothering him”.  I went to the store manager’s office, and he appologized and gave me a $20 gift card, and he called in the assistant manager and made him appologize to me, which he did, but clearly didn’t mean it. The store manager asked me what I was looking for and he pointed me in the right direction, thanked me and asked me to close the door after me. I hung around just outside the door. The store manager was tearing the assistant a new one. So, I felt a lot better. What Sam’s needs is more associates and less managers.

  • Ted Cherry

    Leaving employee wages and/or benefits out of the picture, I find Sam’s and Costco very similar. I belong to both, and for some items one store is better than the other and vise-versa. In general, I prefer Sam’s, only for the fact that they stock more ‘name brand’ merchandise that does Costco. Costco is slowly going to the ‘Kirkland’ brand for everything. Though most of the Kirkland brand is okay, for some items it is inferior to name brand products. And for both stores, having most everything in huge quantities is not always desirable.