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 respective online ecommerce platforms. They also both 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, including in terms of prices, locations, and brand selection.
- 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, but its prices are slightly lower—thanks in part to its private branded products, such as Kirkland.
- Costco has more stores worldwide, but Sam’s Club has more stores in the U.S.
- Costco’s stores are almost 9% larger on average based on square footage.
Costco is considered the original bulk retailer, opening its first location in San Diego in 1976. Since then, it’s been selling bulk goods through numerous warehouse-style stores, cornering the market in many states.
Costco had 815 stores worldwide at the end of its fiscal year (FY) 2021 (ended Aug. 29, 2021), with 564 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 2021 when it opened 22 of them.
There are 131 Costco stores located in California alone. Other heavily represented states include Texas (35), Washington (32), and Florida (28), 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, Japan, China, and other countries.
At the end of their respective 2021 fiscal years, Costco had 564 stores in the U.S., while Sam’s Club had 599.
Costco offers two membership tiers: Gold Star and Gold Star Executive. The Gold Star membership is $60 a year and offers access to all its stores and two membership cards, while the Gold Star 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, discounts on numerous Costco services, and home delivery of the Costco Connection Magazine.
It’s worth noting that Costco also offers a business-focused membership This includes 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 Gold Star Executive package offers.
Benefits and perks
Costco membership provides access to a vast array of different products and services, including gas, pharmacies, car rental, and optical centers, often at lower-than-normal prices. 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 co-branded card offered by Costco and Citi can be used anywhere credit cards are accepted.
Finally, it’s worth noting that Costco sells more private 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 most other products, but they’re still 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.
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.
Costco is a publicly traded company operating under the ticker symbol COST with a market value of roughly $223 billion as of Nov. 11, 2021. It has several smaller subsidiaries, such as Costco Travel and Kirkland brand products, and primarily focuses on its brick-and-mortar and online retail operations.
In FY 2021, net sales, which excludes membership fees, came in at $192 billion, up from $163 billion in the previous FY, while net income rose 25% in the period to just over $5 billion. Financially, Costco is well positioned, too, with a healthy enough balance sheet to weather a downturn and comfortably continue investing in its business where it sees fit.
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, they’re very similar—both sell bulk items to customers that pay for membership. However, there are a few things that separate the two retailers, including store locations, the types of brands they sell, membership fee costs, and extra perks.
Sam’s Club operates 599 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 29. The Walmart subsidiary cannot be found everywhere in the country, though—there are no Sam’s Club stores in Alaska, Massachusetts, Oregon, Rhode Island, Vermont, and Washington.
Like Costco, Sam’s Club offers two membership levels. The first is called Club, which at $45 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 $100 a year, which 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. For 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 works 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.
Sam’s Club generated $64 billion in net sales during its 2021 FY, one-third of what Costco recorded. However, Sam’s Club’s parent company, Walmart, has a $414 billion market cap as of Nov. 11, 2021, which is nearly double Costco’s total dollar market value.
In its FY 2021, which ended Jan. 31, 2021, Sam’s Club posted an 8.7% rise in net sales and a 16.1% increase in operating income. In the prior FY, before the COVID-19 pandemic gripped the nation, these same metrics were up 1.6% and 8.0%, respectively.
Key Differences Between Costco and Sam’s Club
Costco and Sam’s Club operate very similar businesses, although there are several differences that separate the two and make each one unique. 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.
Costco’s membership fees are more expensive than Sam’s Club, albeit not by much—it’s only $15 and $20 a year more for the basic tier and top tier, respectively. Meanwhile, product-wise, Sam’s Club offers more name brands, while Costco stocks more private brands and organic goods.
In terms of location, Costco has a greater international presence and more stores than Sam’s Club does, although not in the U.S. 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 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.
For now, Costco is comfortably beating Sam’s Club in the sales category, generating about three times more in revenues, although that bigger top line is perhaps to be expected given its higher global store count. Costco, has slightly larger stores, too, with an average of 146,000 square feet, versus Sam’s Club’s average of 134,000.
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 One Is Better, Costco or Sam’s Club?
That depends on 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. In the end, it’s up to each individual consumer to decide which one they prefer.
Does Costco or Sam’s Club Have Better Prices?
Overall, the prices at Costco tend to be cheaper. However, Sam’s Club has a greater selection of name-brand products and a cheaper membership fee.
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 ecommerce platform.
Is Sam’s Club Cheaper Than Walmart?
Overall, Sam’s Club is cheaper per unit of product. However, with Sam’s Club, you’re spending more overall because you’re buying more of a product (i.e., in bulk). With Sam’s Club, you might spend 45 cents per roll of toilet paper, but you’re buying 45 rolls, so you’re spending $20.25. With Walmart, you can spend $8.57 for the same toilet paper, but you’re getting 12 rolls, coming out to 71 cents per roll.
The Bottom Line
The typical customer for warehouse retailers like Costco and Sam’s Club are those who like to save money 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 to accommodate buying in bulk) or money for what is a more expensive shopping trip, versus 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, it’ll 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. Part of choosing between the two will come down to the shopping experience (e.g., as a Costco consumer you can get a $1.50 hot dog combo).
Of course, not everyone will be familiar with these stores and may understandably want to test them out before making a choice and paying for membership. With Sam’s Club, this can be achieved by registering for a 90-day free trial membership. Unfortunately, Costco doesn’t provide such an option. If you want to check out one of its stores, you’ll have to tag along with a member or hope nobody asks for a card on the day you turn up.