How Walmart-owned Sam’s Club is trying to take on Costco’s private label Kirkland

by | Jun 27, 2024 | Business

In this articleCOSTWMTFollow your favorite stocksCREATE FREE ACCOUNTStuck at home during the Covid pandemic, Megan Crozier needed a way to keep her two young children entertained. She bought an inflatable pool from Sam’s Club.The pool began leaking air after just a few uses.For Crozier, chief merchant of the Walmart-owned membership club, that trashed pool — and the disappointment that came with it — helped kickstart a years-long effort to catch up with chief rival Costco and the popularity of its private brand, Kirkland Signature.As Sam’s Club opens more locations, it is trying to raise the bar for its own brand, Member’s Mark. The label’s makeover has become critical for Sam’s Club as it aims to close the gap with Costco, which has roughly the same number of U.S. clubs but about twice as much annual revenue. Net sales for Sam’s Club totaled $86.2 billion in its most recent fiscal year, compared with $176.63 billion for Costco’s U.S. clubs.Sam’s Club CEO Chris Nicholas told CNBC the brand’s revamp was inspired, in part, by the retailer’s chief rival.”The club model survives because you have brilliant merchants focusing on creating or buying exceptional items,” he said in an interview. “Costco did such a great job of that over the years with Kirkland and we saw that be successful.”The success of Member’s Mark will help determine how Sam’s Club fares as its expands, with plans to open more than 30 stores over the next four years. At least some stores will be in regions where potential customers belong to a competing club like Costco or B.J.’s Wholesale, or in areas where customers may need convincing to pay an annual membership to be able to shop.Overtaking Costco and its beloved private label won’t be easy for Sam’s Club, said Michael Baker, a retail analyst for D.A. Davidson.”Never say never,” he said. “Who knows? But I think it’s going to take a long time.”But he added Costco’s success with Kirkland Signature created a formula that Sam’s Club can follow.The popularity of Kirkland’s brand, which includes a diverse range of items like vodka, batteries and dress shirts, has helped to drive membership sign-ups and renewals. It is one of the features that Costco highlights when the retailer’s pitch to members.In this photo illustration, Sam’s Club’s private label Member’s Mark is seen versus Costco’s Kirkland Signature label.Natalie Rice | CNBCPrivate label wars heat upSam’s Club has more reasons than its rivalry with Costco to step up its private label game.The brands’ stigma of inferior quality or cheaper knockoffs of national name brands has faded as retailers including Kroger, Target and Walmart have introduced their own labels with unique flavors and exclusive items.Baker credits Kirkland for helping with that since Costco launched the brand in 1995.”They didn’t invent the idea of private label,” he said. “But I think what they changed or made revolutionary is that it can be a high quality product.”Jordan Vonderhaar | Bloomberg | Getty ImagesOther factors have turned the tide. Consumers experimented with new brands during the Covid pandemic when they couldn’t find their typical purchases on shelves. Some fast-growing grocers, including Trader Joe’s, Aldi and Lidl, have fueled growth almost entirely through their own brands. And stubborn inflation also pushed more consumers to buy a store’s own brand to save some bucks.Sales of private label increased 34% between 2019 and 2023 to $236.3 billion, according to the annual report by the Private Label Manufacturers Association, which is conducted by market research firm Circana.Exclusive offerings, such as products you can’t find anywhere else, are even more essential for clubs, which require shoppers to pay a membership fee. Annual fees cost $60 at Costco and $50 at Sam’s Club. Each also has a higher-tier membership: $120 at Costco and $110 at Sam’s Club. (Costco is widely expected to raise …

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[mwai_chat context=”Let’s have a discussion about this article:nnIn this articleCOSTWMTFollow your favorite stocksCREATE FREE ACCOUNTStuck at home during the Covid pandemic, Megan Crozier needed a way to keep her two young children entertained. She bought an inflatable pool from Sam’s Club.The pool began leaking air after just a few uses.For Crozier, chief merchant of the Walmart-owned membership club, that trashed pool — and the disappointment that came with it — helped kickstart a years-long effort to catch up with chief rival Costco and the popularity of its private brand, Kirkland Signature.As Sam’s Club opens more locations, it is trying to raise the bar for its own brand, Member’s Mark. The label’s makeover has become critical for Sam’s Club as it aims to close the gap with Costco, which has roughly the same number of U.S. clubs but about twice as much annual revenue. Net sales for Sam’s Club totaled $86.2 billion in its most recent fiscal year, compared with $176.63 billion for Costco’s U.S. clubs.Sam’s Club CEO Chris Nicholas told CNBC the brand’s revamp was inspired, in part, by the retailer’s chief rival.”The club model survives because you have brilliant merchants focusing on creating or buying exceptional items,” he said in an interview. “Costco did such a great job of that over the years with Kirkland and we saw that be successful.”The success of Member’s Mark will help determine how Sam’s Club fares as its expands, with plans to open more than 30 stores over the next four years. At least some stores will be in regions where potential customers belong to a competing club like Costco or B.J.’s Wholesale, or in areas where customers may need convincing to pay an annual membership to be able to shop.Overtaking Costco and its beloved private label won’t be easy for Sam’s Club, said Michael Baker, a retail analyst for D.A. Davidson.”Never say never,” he said. “Who knows? But I think it’s going to take a long time.”But he added Costco’s success with Kirkland Signature created a formula that Sam’s Club can follow.The popularity of Kirkland’s brand, which includes a diverse range of items like vodka, batteries and dress shirts, has helped to drive membership sign-ups and renewals. It is one of the features that Costco highlights when the retailer’s pitch to members.In this photo illustration, Sam’s Club’s private label Member’s Mark is seen versus Costco’s Kirkland Signature label.Natalie Rice | CNBCPrivate label wars heat upSam’s Club has more reasons than its rivalry with Costco to step up its private label game.The brands’ stigma of inferior quality or cheaper knockoffs of national name brands has faded as retailers including Kroger, Target and Walmart have introduced their own labels with unique flavors and exclusive items.Baker credits Kirkland for helping with that since Costco launched the brand in 1995.”They didn’t invent the idea of private label,” he said. “But I think what they changed or made revolutionary is that it can be a high quality product.”Jordan Vonderhaar | Bloomberg | Getty ImagesOther factors have turned the tide. Consumers experimented with new brands during the Covid pandemic when they couldn’t find their typical purchases on shelves. Some fast-growing grocers, including Trader Joe’s, Aldi and Lidl, have fueled growth almost entirely through their own brands. And stubborn inflation also pushed more consumers to buy a store’s own brand to save some bucks.Sales of private label increased 34% between 2019 and 2023 to $236.3 billion, according to the annual report by the Private Label Manufacturers Association, which is conducted by market research firm Circana.Exclusive offerings, such as products you can’t find anywhere else, are even more essential for clubs, which require shoppers to pay a membership fee. Annual fees cost $60 at Costco and $50 at Sam’s Club. Each also has a higher-tier membership: $120 at Costco and $110 at Sam’s Club. (Costco is widely expected to raise …nnDiscussion:nn” ai_name=”RocketNews AI: ” start_sentence=”Can I tell you more about this article?” text_input_placeholder=”Type ‘Yes'”]
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