Costco vs. Sam's Club: A Retail Battle for the Membership Economy

The rivalry between Costco (COST) and Sam's Club (a Walmart WMT subsidiary) has intensified as both retailers refine their membership models and supply chains to dominate the warehouse club sector. While Costco remains the undisputed leader in scale and profitability, Sam's Club's lower prices, Walmart-backed logistics, and strategic innovations are positioning it as a formidable competitor. This article examines how Sam's Club's moves in membership pricing, perks, and operational efficiency could reshape the industry—and what it means for investors.

The Membership Model Faceoff

Membership fees are the lifeblood of both companies, but their strategies diverge sharply.

Costco's Premium Play:
- Fees: Gold Star ($65/year) and Executive ($130/year) memberships cater to high-spending households, with rewards like $1,250 in annual cash back (up from $1,000 in 2023).
- Value Proposition: Focuses on exclusivity and quality, leveraging its Kirkland Signature brand (e.g., organic produce, premium electronics) to justify higher fees.
- Loyalty Metrics: A 92.7% membership renewal rate underscores its stickiness, even after its first fee hike in seven years.

Sam's Club's Accessibility Edge:
- Fees: Club ($50/year) and Plus ($110/year) memberships remain unchanged since 2022, offering lower entry barriers.
- Perks: Plus members get 2% cash back (capped at $500), free shipping, and early store access. Walmart's “price hold” initiatives on staples like paper towels and hot dogs further appeal to budget-conscious shoppers.
- Growth Leverage: Sam's membership income surged 14.4% in Q2 2025, outpacing Costco's 7.4% growth, driven by its Plus tier's 320-basis-point penetration increase.

Investment Implication: Sam's Club's affordability and Walmart's promotional firepower could erode Costco's dominance in price-sensitive segments. Investors should watch whether Costco's premium pricing strategy retains its allure or faces backlash from cost-conscious consumers.

Supply Chain Showdown: Global Reach vs. Local Muscle

Both retailers rely on their supply chains to deliver low prices and consistent inventory, but their approaches differ.

Costco's Global Goliath:
- Scale: 838 stores globally (578 in the U.S.), including strong positions in Canada, Mexico, and Asia.
- Efficiency: A streamlined 4,000-SKU inventory reduces costs and ensures high turnover.
- Private Labels: Kirkland Signature accounts for 30% of sales, with partnerships (e.g., Starbucks, Duracell) enhancing margins.

Sam's Club's Walmart Advantage:
- Domestic Dominance: 600 U.S. stores, concentrated in high-growth states like Texas (82 stores).
- Walmart Synergies: Shares Walmart's vast logistics network, enabling price parity on everyday items and 22% e-commerce growth in 2025.
- SKU Breadth: A 6,000-SKU catalog offers more brand diversity but may strain inventory management.

Investment Implication: Costco's global footprint and private-label focus provide a moat against Sam's Club's U.S. price wars. However, Sam's Club's integration with Walmart's supply chain could allow it to undercut Costco in key markets. Investors should monitor Costco's international expansion (e.g., China, where it added 13 stores in 2024) versus Sam's Club's Walmart-backed cost advantages.

Financial Performance: Costco Leads, Sam's Grows Faster

• Revenue: Costco's $222.7B in FY2022 sales dwarf Sam's Club's $84.3B in FY2023.
• Margins: Costco's gross margin (13.6%) is higher than Sam's Club's (12.1%), but Sam's Club's e-commerce surge (22% growth) and membership-driven profits are narrowing the gap.
• Stock Performance:

Investment Thesis

Costco (COST): Buy for its premium brand, strong unit economics, and global scale. Risks include reliance on discretionary spending and potential margin pressure from Sam's Club's price competition.

Walmart (WMT): Hold as Sam's Club's growth and Walmart's cost-cutting (e.g., AI-driven catalog optimization) underpin resilience. Sam's Club's 26% membership growth in China highlights its untapped international potential.

Final Analysis

Sam's Club poses a credible threat to Costco by combining Walmart's logistical might with affordable memberships and everyday-low-pricing strategies. However, Costco's superior margins, brand equity, and focus on high-margin organic/private-label goods maintain its edge. Investors should consider Costco as a core holding for its defensive qualities but stay alert to Sam's Club's innovations, which could redefine the warehouse retail landscape.

In a sector where customer loyalty is king, the battle for the membership economy will hinge on who best balances affordability, quality, and convenience. For now, Costco leads—but Sam's Club is catching up fast.