Sam's Club's Stealth Offensive: How Walmart's Discount Giant Could Overtake Costco in the Membership Wars

The membership-based warehouse retail sector has long been Costco's domain, but Sam's Club—a division of Walmart Inc. (WMT)—is now sharpening its competitive edge with a bold, data-driven strategy. At the recent Evercore ISI Consumer and Retail Conference, CFO Todd Sears laid out a roadmap that could redefine the industry: a blend of aggressive expansion, digital innovation, and supply chain synergy with Walmart. For investors, this is a moment to reassess the dynamics of a $300 billion market where convenience, cost discipline, and customer loyalty are the new battlegrounds.

The Membership Play: Growth at Warp Speed

Sam's Club aims to double its business and membership within 8–10 years, a timeline that accelerates its previous targets. Over the past five years, sales have risen 50% and memberships are up 33%—without adding a single new club. This organic momentum is now being turbocharged by a 30-club expansion plan over five years, with 15 clubs annually once the pipeline matures. Contrast this with Costco's slower pace: it opened just six U.S. locations in 2024.

But the real disruptor lies in Sam's Club's digital ecosystem. E-commerce now accounts for 17% of total sales (excluding fuel), a figure that spiked 27% in the latest quarter. Delivery sales surged 160%, fueled by novel services like pizza and rotisserie chicken delivery—moves that mimic the convenience of Amazon Fresh or Instacart. Meanwhile, Scan & Go technology, now driving 35% of sales (up 600 basis points year-over-year), is a decade-old innovation that's finally hitting its stride.

Supply Chain Synergy: Walmart's Secret Weapon

Where Sam's Club truly gains an edge is through its integration with Walmart's vast supply chain. By aligning procurement, logistics, and inventory systems, Sam's Club can slash costs in ways Costco cannot. For example, shifting flower imports to U.S. suppliers to avoid tariffs—a move enabled by Walmart's global sourcing clout—demonstrates how vertical integration can insulate margins.

This synergy isn't just about cost-cutting. Fresh produce sales, a key driver of foot traffic, grew by double digits in the latest quarter, aided by sushi offerings now available in 581 of 600 clubs. Walmart's infrastructure allows Sam's Club to stock perishables at scale, while Scan & Go and AI-driven floor scrubbers optimize labor costs. The result? A low-price model where 80–90% of profits come from membership fees—a structure that prioritizes growth over margins, unlike Costco's premium pricing strategy.

The Membership Loyalty Tipping Point

Sam's Club's data-centric approach is designed to lock in members through convenience. The 33% membership growth in five years is no accident: digital tools like delivery and Scan & Go create sticky engagement. Once members adopt these services, Sears noted, they're less likely to churn. This contrasts with Costco's reliance on bulk purchasing incentives, which may feel less relevant in an era of fast, flexible delivery.

The financials underscore the shift. Comp sales rose 6.7% in the latest quarter, driven by fresh groceries and health/wellness categories—segments where Sam's Club's in-store experience (e.g., dedicated sushi chefs) creates emotional resonance. Even general merchandise defied deflation, with unit sales growing faster than price declines.

Risks and the Road Ahead

Sam's Club isn't without challenges. Its low-margin model means Walmart must tolerate slower ROI compared to its U.S. division, which prioritizes margin expansion. Additionally, Costco's brand equity and higher membership fees (at $60 annually vs. Sam's $48) remain formidable barriers. Yet Sam's Club's $17 billion in e-commerce sales growth potential (if it reaches Costco's 25% e-commerce penetration) suggests it could flip the script.

Investment Implications: Betting on Disruption

For investors, Sam's Club's strategy offers two avenues:

1. Walmart's Stock (WMT): The parent company's supply chain and infrastructure are the backbone of Sam's Club's growth. Investors can indirectly profit from its expansion, though WMT's broader retail portfolio dilutes the play.
2. Sector Rotation: If Sam's Club's membership model proves scalable, it could force Costco (COST) to respond with its own cost-cutting or innovation—a dynamic that could pressure COST's valuation.

Final Analysis

Sam's Club isn't just playing catch-up—it's redefining the rules. By merging Walmart's logistical might with digital-first tools like Scan & Go and delivery, it's targeting Costco's core: convenience and affordability. The membership wars are far from over, but for investors, the question is clear: Can Sam's Club's data-driven, cost-efficient model sustain a two-decade membership growth spurt? If so, Walmart's smaller sibling may just become the disruptor that reshapes the entire sector.

Investment Takeaway: Monitor Sam's Club's club openings and e-commerce penetration metrics. If they hit targets, WMT's valuation could see a re-rating. Meanwhile, COST's stock may face pressure if Sam's Club's price discipline erodes its premium position. The era of “big boxes” is evolving—and the next champion is writing its playbook in Bentonville.