Costco vs. Sam's Club: An Overview
Wholesaler retailers Costco and Sam's Club are renowned for their competitively low prices, bulk products, and no-frills shopping experience.
Both sell pretty much everything imaginable in a warehouse setting. At first glance, it can be difficult to determine which of the two is the better option.
These two bulk retailers shelve a similar range of products at similar prices and have a more or less equal number of stores distributed throughout the country, as well as their own online e-commerce platforms.
Both also require customers to pay membership fees to shop with them, which helps to boost revenues, cover costs, and create store loyalty.
In this article, we'll look at how the business models of Costco and Sam's Club are alike while also breaking down how they differ in prices, locations, brand selection, and more.
Key Takeaways
- Costco and Sam's Club have very similar business models.
- Costco is a publicly traded company, while Sam's Club is a subsidiary of Walmart.
- Costco's membership fees are more expensive and the prices of basic products at Sam's Club are generally cheaper.
- Costco has more stores worldwide, but Sam's Club has more stores in the U.S.
- Costco has a larger store foot print in terms of total square footage.
Costco
Costco is considered the original bulk retailer, having opened its first location in San Diego in 1976 (as Price Club). Since then, it's been selling bulk goods through numerous warehouse-style stores, cornering the market in many states.
Locations
Costco had 838 stores worldwide at the end of its fiscal year (FY) 2022 (ended Aug. 28, 2022), with 578 of them located in the U.S. and Puerto Rico. The company has been aggressively opening new warehouse stores over the years, including in FY 2022 when it opened 23 of them.
There are 133 Costco stores located in California alone, the most in any state. Other heavily represented states include Texas (38), Washington (33), and Florida (30), while four states have no Costco stores—Maine, Rhode Island, West Virginia, and Wyoming.
Costco also has stores outside the U.S., including in Canada, Mexico, Korea, Japan, China, and other countries.
At the end of their respective fiscal years (2022 for Costco and 2023 for Sam's Club), Costco had 578 stores in the U.S., while Sam's Club had 600.
Membership Fees
Costco offers two membership tiers: Gold Star and Executive. The Gold Star membership is $60 a year and offers access to all Costco stores and two membership cards.
The Executive membership costs $120 per year and includes additional perks such as a 2% cash-back reward (up to $1,000) on all Costco and Costco Travel purchases, and discounts on numerous Costco services.
Costco also offers a business-focused membership. It has two tiers as well: Business and Business Executive. The Business level is $60 a year and includes the benefits individuals enjoy, as well as the ability to purchase for resale.
For double that price, at $120, the Business Executive level adds some extras, including a 2% cash-back reward (of up to $1,000) on purchases as well as other benefits similar to those the Executive package offers.
Benefits and Perks
Costco membership provides access to a vast array of different products and services, including gas, pharmacies, car rental, car insurance, and optical centers, often at lower-than-normal prices. Canadian members can also access discounted pet insurance.
For business customers, Costco offers additional third-party services, too, such as payment processing, health insurance, and bottled water delivery.
Costco also has a credit card for members. The card is co-branded with Citi and offers 4% cash back on the first $7,000 spent on fuel per year (1% after that), 3% on restaurants and travel, 2% on all other Costco purchases, and 1% on all other purchases. The card can be used anywhere credit cards are accepted.
Finally, it's worth noting that Costco sells more privately branded goods than Sam's Club does. As a shopper, you'll likely find more brand-name items in Sam's Club. However, Costco offers its popular private brand Kirkland in its stores.
Kirkland items are often cheaper than other products even though they're made by big-name companies, such as Starbucks, Duracell, and Kimberly-Clark. Most Costco stores also offer a larger selection of organic produce than Sam's Club.
Financials
Costco is a publicly traded company operating under the ticker symbol COST, with a market value of roughly $234.7 billion as of July 11, 2023. It has several smaller subsidiaries, such as Costco Travel and Kirkland brand products. It primarily focuses on its brick-and-mortar and online retail operations.
In FY 2022, net sales, which excludes membership fees, came in at $222.7 billion, up from $192.1 billion in the previous fiscal year. Net income rose 16.7% in the period to $5.8 billion. In addition, Costco's healthy balance sheet positions it to weather a downturn and comfortably continue investing in its business where it sees fit.
Costco's private brand products, such as Kirkland, are cheaper than name-brand products but are made by many well-known companies, such as Starbucks, Perrigo, Duracell, and Kimberly-Clark, so shoppers receive the price benefit for goods made by name brands.
Employee Pay and Benefits
According to a third-party hiring agency, a clear majority of employees at Costco feel they're paid fairly. Here's a sampling of salaries reported:
- Cashier: $18.41 per hour
- Optician: $28.41 per hour
- Stocker: $18.58 per hour
- Inventory control specialist: $27.66 per hour
- Facility coordinator: $23.25 per hour
- Assistant buyer: $78,763 per year
Costco's employee benefits cover a broad range:
- Health care
- Pharmacy program
- Dental care
- Vision program
- Paid bonding leave
- Health care reimbursem*nt account
- Dependent care reimbursem*nt account
- Voluntary short-term disability
- Long-term disability
- Life insurance and AD&D insurance
- Employee assistance program
- Employee stock purchase plan
- 401(k) plan
- Programs to support physical, emotional, and financial well-being
- Paid sick and vacation time
- Eight paid holidays
- One paid floating holiday
Sam's Club
Walmart's Sam's Club is nearly as old as Costco, opening its first store in 1983 in Midwest City, Okla. As far as business models go, it's very similar to Costco. Both sell bulk items to customers who purchase memberships.
However, there are a few things that separate the two retailers, including store locations, the types of brands they sell, membership fees, and extra perks.
Locations
Sam's Club operates 600 stores across the U.S. and Puerto Rico. However, unlike Costco, it has not been aggressively expanding, keeping its store count relatively steady over the past few years.
The heaviest concentration of Sam's Club stores is in Texas, which is home to 82 of them, followed by Florida with 46, and California with 30.
The Walmart subsidiary isn't found everywhere in the country, though. There are no Sam's Club stores in Alaska, Massachusetts, Oregon, Rhode Island, Vermont, and Washington.
Membership Fees
Like Costco, Sam's Club offers two membership levels. The first is called Club, which at $50 per year includes access to all its warehouse clubs as well as the ability to add additional cards.
Then there's the higher-tier Plus membership for $110 a year. It comes with all the benefits of Club plus other perks—2% cash back on certain transactions (for up to $500 a year), free shipping, early store access hours, and access to pharmacy and optical services. Overall, both of Sam's Club's membership tiers are cheaper than Costco's.
Benefits and Perks
For a relatively small fee, Sam's Club members gain access to price-competitive stores stocking pretty much everything. With higher-tier membership, there are also discounts on certain goods and services, such as eyeglasses, fuel, travel, and branded drugs.
Sam's Club offers a credit card, too. The company's Mastercard is issued by Synchrony Bank and can be used everywhere credit cards are accepted. The perks of the Mastercard include 5% cash back on the first $6,000 in fuel purchases per year, then 1% thereafter. In addition, the card offers 3% cash back on dining and takeout and 1% on all other purchases.
Financials
Sam's Club generated $84.3 billion in net sales during its FY 2023, which ended Jan. 31, 2023. This is approximately one-third of what Costco recorded. However, Sam's Club's parent company, Walmart, had a $416.3 billion market cap as of July 11, 2023, which is almost double Costco's total dollar market value.
In its FY 2023, Sam's Club posted a 14.7% rise in net sales but a 13% decrease in operating income.
Employee Pay and Benefits
Just over half of Sam's Club employees feel satisfied with their salaries. Here's a sampling of salaries reported:
- Stocking associate: $19.96 per hour
- Food service associate $16.88 per hour
- Merchandiser: $17.76 per hour
- Supervisor: $22,580 per year
- Club manager: $73,236 per year
- Senior software engineer: $110,595 per year
Sam's Club's wide range of employee benefits include:
- Medical insurance
- Dental insurance
- Vision insurance
- Critical illness and accident insurance
- Accidental death and dismemberment insurance
- Maternity and parental leave
- 401(k)
- Paid time off, including vacation, holidays, and sick leave
- Business travel accident insurance
- Company-paid life insurance (full-time employees only)
- Optional life insurance for yourself and your dependents
- Short-term and long-term disability
- Live Better U educational program
Key Differences
Costco and Sam's Club operate very similar businesses, although there are several differences that separate the two and make each one unique.
Exchange Listings
To start, Costco is a publicly traded company that trades on the Nasdaq under the ticker symbol COST. Sam's Club, on the other hand, is a subsidiary of Walmart, which trades under the ticker WMT on the New York Stock Exchange.
Membership Fees
Costco's membership fees are more expensive than Sam's Club—$10 a year more for each tier. Meanwhile, product-wise, Sam's Club offers more name brands, while Costco stocks more private brands and organic goods.
Locations
In terms of location, Costco has a greater international presence and more stores than Sam's Club does, although not in the U.S., where Sam's Club has more.California is the state with the most Costco stores, while Sam's Club's biggest presence is in Texas. Both retailers have also refrained from opening stores in some states, although only one, Rhode Island, has neither a Costco nor a Sam's Club.
Costco has more stores across the globe, is expanding rapidly, and generally offers cheaper prices than Sam's Club does, although the latter charges slightly less for membership, has a bigger presence in the U.S., and stocks more name brands.
Sales, Growth, and Expansion
For now, Costco is comfortably beating Sam's Club in the sales category, generating almost three times more in revenues, although that bigger top line is perhaps to be expected given its higher global store count.
Costco has a larger foot print in total store size, too, with a total of 122.5 million square feet, versus Sam's Club's total of 80.4 million.
One clear takeaway is that Costco appears to be growing faster, from both a store count and revenue perspective. Sam's Club closed several stores a couple of years ago—roughly 10% of its store count at the time. Meanwhile, Costco has been on a steady run of net store openings.
Which Is Better, Costco or Sam's Club?
That depends on your personal preferences, such as the types of products you buy and which of these two retailers is within reasonable driving distance of your home.
Both companies have similar business models, sell comparable goods and services, and only grant access to paying members. Where they mainly differ, other than location, is in the brands they may sell, additional perks, and annual membership fees. Sam’s Club costs slightly less.
Does Costco or Sam's Club Have Better Prices?
Overall, the prices for basic products at Sam's Club are lower and it has cheaper membership fees when compared to Costco.
Can I Use My Costco Membership at Sam's Club?
No, Costco memberships only work at Costco stores and online at Costco.com. The same goes for Sam's Club, where membership is limited to Sam's Club's stores and the e-commerce platform.
The Bottom Line
The typical customer for warehouse retailers like Costco and Sam’s Club is one who likes to save money by buying in bulk. Buying this way does not always translate well to online shopping, however, because delivering bulk items can be cumbersome.
Shopping at warehouse locations can be prohibitive for customers who don’t have the storage space (e.g., freezer size) or money for what is a more expensive shopping trip (compared to Walmart, for example). The average transaction total is higher at bulk warehouse retailers compared to discount retailers because—although you’re getting cheaper per-unit prices—you’re buying more overall.
For many shoppers, the choice between Costco and Sam's Club will come down to which store is closer to their home. Other than that, there's not much difference in terms of membership prices or product prices. Moreover, part of choosing between the two will depend on the shopping experience.
As an enthusiast with extensive knowledge in the retail industry, particularly in the realm of warehouse clubs, I have closely followed and analyzed the dynamics between major players such as Costco and Sam's Club. My expertise is demonstrated by my in-depth understanding of their business models, financial structures, locations, membership fees, benefits, and key differences.
Let's delve into the concepts mentioned in the article:
-
Business Models:
- Both Costco and Sam's Club operate on a similar business model, offering bulk products, low prices, and a no-frills shopping experience.
- Membership fees are a crucial aspect of their business models, providing a source of revenue, covering costs, and fostering customer loyalty.
-
Locations:
- Costco, considered the original bulk retailer, has 838 stores worldwide, with a significant presence in the U.S., Canada, Mexico, Korea, Japan, China, and other countries.
- Sam's Club operates 600 stores primarily in the U.S. and Puerto Rico, with a more stable store count in recent years compared to Costco's aggressive expansion.
-
Membership Fees:
- Costco offers two membership tiers: Gold Star and Executive, with fees of $60 and $120 per year, respectively.
- Sam's Club has two membership levels: Club at $50 and Plus at $110 per year, making its memberships slightly cheaper than Costco's.
-
Benefits and Perks:
- Both retailers provide various perks beyond bulk product purchases, such as discounts on services, credit cards with cash-back rewards, and additional benefits for business-focused memberships.
- Costco's membership benefits cover a wide range of products and services, including gas, pharmacy, car rental, and more.
-
Financials:
- Costco is a publicly traded company (COST) with a market value of approximately $234.7 billion (as of July 11, 2023). In FY 2022, net sales were $222.7 billion.
- Sam's Club is a subsidiary of Walmart (WMT), and its parent company had a market cap of $416.3 billion. Sam's Club generated $84.3 billion in net sales during FY 2023.
-
Employee Pay and Benefits:
- Both retailers offer competitive wages and a range of benefits for their employees, including health care, dental care, vision programs, 401(k) plans, and more.
-
Key Differences:
- Costco is publicly traded on Nasdaq, while Sam's Club is a subsidiary of Walmart, traded on the New York Stock Exchange.
- Costco generally has more international presence and stores worldwide, while Sam's Club has a stronger presence in the U.S.
- Costco tends to offer cheaper prices, but Sam's Club charges slightly less for membership.
- Sam's Club stocks more name brands, while Costco emphasizes its private brand, Kirkland.
In conclusion, the choice between Costco and Sam's Club often comes down to personal preferences, proximity to home, and specific product or brand preferences. Each has its strengths and unique offerings, catering to the diverse needs of their customer base.
