Sam’s Club and Costco are locked in one of retail’s most closely watched battles.
Both warehouse clubs ask shoppers to pay an annual fee for access to lower prices on groceries, household products, gas, and a growing range of other goods and services.
Both companies have built fiercely loyal customer bases. And both are betting that once shoppers become members, they’ll keep coming back to spend.
But Sam’s Club has one advantage it’s been able to use against Costco for years — its membership is cheaper.
Now, Sam’s Club is taking that advantage a step further with a limited-time promotion that could make it much easier for Costco members or shoppers who have never belonged to a warehouse club to give its rival a try.
Sam’s Club wants to get shoppers through the door
For a limited time, new Sam’s Club members can get a one-year Club membership for just $25.
That’s a steep discount from the regular $60 annual price point.
For consumers already paying for Costco, the promotion offers a relatively inexpensive way to see whether Sam’s Club deserves a place in their shopping routine. And that’s exactly what Sam’s Club wants.
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The real value of a membership promotion isn’t necessarily the money collected on day one. It’s what happens after the customer signs up.
New members who try Sam’s Club on a whim thanks to the promotion can quickly see how much savings they can reap by purchasing groceries in bulk and taking advantage of other offers.
If the experience sticks, Sam’s Club has an opportunity to turn a $25 introductory membership into a long-term customer.
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Sam’s Club membership discount aligns with Walmart strategy
The limited-time Sam’s Club membership discount makes sense, given the momentum behind Walmart’s broader membership business.
During Walmart’s latest earnings call, the company said global membership fee revenue increased 17% year over year, driven by record second-quarter net additions for Walmart+ and 6% growth at Sam’s Club U.S.
“We are building what we believe can be the most essential membership program for consumers and excited for what’s ahead,” said Walmart CFO John Rainey during the call.
That’s a business the company has plenty of incentive to keep expanding.
Membership fees are particularly attractive to warehouse clubs because they create a recurring revenue stream.
Sam’s Club is therefore making a calculated trade — collecting less from a new member today in the hopes of getting years of membership fees and potentially much more merchandise spending down the road.
Costco isn’t playing the membership discount game
This isn’t the first time Sam’s Club has offered up a discounted membership. But Costco pretty much refuses to offer membership discounts, and its numbers help explain why.
Costco collected $1.37 billion in membership fee revenue during its most recent reported quarter, up 10.7% year over year.
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Costco ended the quarter with nearly 83 million paid members, while its higher-priced Executive membership continued to grow even faster.
This means Costco doesn’t need to slash its membership price to attract customers. Its strategy is to make the membership valuable enough that shoppers willingly pay for it and then renew.
The company has repeatedly emphasized the role membership fees play in its low-price business model. Those fees help Costco cover operating expenses, while allowing it to maintain relatively low margins on the merchandise it sells.
That’s why Costco has little incentive to match Sam’s Club’s $25 promotion. In fact, Costco has gone in the opposite direction.
In 2024, it raised the Gold Star membership price from $60 to $65 and the Executive membership price from $120 to $130.
The fact that Sam’s Club is willing to discount membership shows that the company may be less confident in customers’ willingness to try out the store and renew. It also speaks to the strength of the Costco name and the value its memberships are known to offer.
Maurie Backman owns shares of Costco and Walmart.
