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Club Stores: Differentiation within the channel

PBP warehouse club stores

For the most part, the top three warehouse chains have similar strategies and tactics, and proximity is one of the main reasons consumers choose one chain over another. But there are some differences.

Costco Wholesale Corporation’s BB #:150902 Kirkland Signature private label meets or exceeds national brands in quality, has a very strong following, and accounts for about a quarter of the retailer’s sales. It has a reputation for being one of the best store brands in all of retail, not just in the warehouse club category.

While all three retailers have strong store brand offerings, Kirkland attracts the most intense loyalty.

Kirkland at Costco is a very well-known brand with many offerings at a solid price point,” says Brian Numainville, principal at The Feedback Group in Lake Success, NY.

Costco also generally has more variety in its food offerings compared to its competitors, experts say. It’s known for high quality offerings and plenty of free food samples.

“It’s a food extravaganza when you to go Costco,” says Phil Lempert, the Supermarket Guru of Santa Monica, CA. “They changed the world with their sampling.”

Costco’s assortment changes frequently, giving it the most treasure-hunt appeal. The club is also known for its cheap, good-quality food court, especially its $1.50 hot dog and drink combo, although Sam’s has undercut that price recently.

As for produce, Costco has a wider assortment of organics and value-added products than the others.

“In the cooled produce area of Costco, I’d estimate 60 to 70 percent of the items are organic and include items like organic butternut squash and baby spinach,” mentions Numainville. “There are also a number of value-added produce items in numerous sections throughout the fresh area of the store.”

The fresh food assortment at Sam’s Club BB #:140368 is also high quality, but is narrower than Costco’s. The company has been expanding its range under its Member’s Mark private label—which accounts for 30 percent of Sam’s Club dollar sales and more than a third of its unit sales—as well as surveying its customers about how the label could be improved.

Aside from its private label program, Sam’s offers a larger selection of national brands than its key competitors.

The Walmart division, which counts Texas as its largest market in terms of store count, raised its membership fees in 2022 from $45 to $50 at the lower tier and from $100 to $110 for its premium tier. It remains slightly less expensive than either Costco or BJ’s.

One of the key differentiators at Sam’s Club is its use of technology and automation. It’s credited with having a better online and omnichannel experience, and Unlike Costco, it maintains the same prices for items sold online or in-store.

BJ’s Wholesale Club, Inc. BB #:162875 stores range from about half of Costco’s average size at the low end to about 10 percent less at the high end. It has the most no-frills environment of all three chains and is the only one to honor manufacturer coupons.

And, while BJ’s offers many bulk sizes, it also carries regular-sized items, making it more practical for smaller families. “For the average American shopper, it’s a great alternative,” Lempert says.

The company closed its in-store pharmacies in 2007 and discontinued its food court in 2016, adding Dunkin’ outlets in some of its locations instead.

This is an excerpt from the feature story from the March/April 2024 issue of Produce Blueprints Magazine. Click here to read the whole issue.