Megan Crozier was stuck at home during the coronavirus pandemic and needed a way to keep her two young children entertained. She bought an inflatable pool from Sam’s Club.
The swimming pool started leaking air after just a few uses.
For chief businessman Crozier WalmartOwned members club, that cesspit — and the disappointment that followed — helped kick off a years-long effort to catch up to its archrivals costco and the popularity of its own brand, Kirkland Signature.
As Sam’s Club opens more stores, it is working to raise the bar for its private label, Member’s Mark. The brand revamp is crucial for Sam’s Club as it aims to close the gap with Costco, which has roughly the same number of club stores in the U.S. but has about twice as much annual revenue. Sam’s Club net sales totaled $86.2 billion in its most recent fiscal year, while Costco’s U.S. stores had net sales of $176.63 billion.
Sam’s Club CEO Chris Nicholas told CNBC that the brand’s revamp was partly inspired by the retailer’s main competitors.
“The club model has survived because there are talented merchants here who are focused on creating or buying special items,” he said in an interview. “Costco has done a great job with Kirkland over the years and we’ve seen that its success.”
The success of Member’s Mark will help determine how well Sam’s Club performs as it expands, with plans to open more than 30 stores over the next four years. At least some of the stores will be located in areas where potential customers belong to competing clubs like Costco. BJ wholesaleor in areas where customers may need to be persuaded to pay an annual membership fee to shop.
Sam’s Club says it won’t be easy to surpass Costco and its beloved private brands Michael Baker, DA Davidson retail analyst.
“Never say never,” he said. “Who knows? But I think it’s going to take a long time.”
But he added that Costco’s success with Kirkland Signature has created a model that Sam’s Club can follow.
The popularity of the Kirkland brand, which includes merchandise as diverse as vodka, batteries and dress shirts, helps drive membership signups and renewals. This is one of the features that Costco emphasizes Retailer promotion to members.
In this photo illustration, you can see Sam’s Club’s private label Member’s Mark and Costco’s Kirkland Signature labels.
Natalie Rice | CNBC
The war for private labels intensifies
Sam’s Club has more reasons than competing with Costco Stepping up its private label game.
With retailers including hook up, Target and Walmart Launched its own brand with unique flavors and exclusive merchandise.
Baker credits Kirkland with helping Costco since it launched the brand in 1995.
“They have no idea of inventing their own brand,” he said. “But I think what they’ve changed or revolutionized is that it can be a high-quality product.”
Jordan Vonderhaar | Bloomberg | Getty Images
Other factors turned the tide. During the COVID-19 pandemic, when consumers couldn’t find their favorite products on the shelves, they started trying new brands. Some fast-growing grocers, such as Trader Joe’s, Aldi and Lidl, drive growth almost entirely through private label brands. Stubborn inflation is also prompting more consumers to buy store brands to save some money.
According to the Private Label Manufacturers Association’s annual report conducted by market research firm Circana, private label sales grew 34% between 2019 and 2023, reaching $236.3 billion.
Exclusive products, such as ones you can’t find elsewhere, are even more important to clubs, which require shoppers to pay a membership fee. The annual fee is $60 at Costco and $50 at Sam’s Club. There are also higher levels of membership available for everyone: Costco membership is $120 and Sam’s Club membership is $110. (Given Costco’s track record, it’s widely expected to raise annual fees soon.)
At Sam’s Club, member brands account for about 30% of sales in dollar terms and more than one-third of sales in unit sales terms. Kirkland accounts for about 28% of Costco’s annual sales.
Costco declined an interview request for this article.
Sam’s Club is working hard to improve the quality of its membership brands. In early June, the company showcased its private-label clothing, food and other merchandise to investors and reporters at an event near its headquarters in Bentonville, Arkansas.
Melissa Repko | CNBC
Renovation of membership logo
Over the past few years, Sam’s Club has consolidated more than 20 different private label brands into one brand: Member’s Mark. It announced new targets for food and commodity standards it plans to reach by 2025, such as switching to antibiotic-free poultry and Fairtrade-certified coffee beans.
The company recently launched a program that allows customers to help co-create member-marked merchandise by providing feedback on flavors, designs and more before retailers approve the items for sale on shelves.
Nicholas said customers won’t hesitate. “They’re strict, like, ‘Hey, this seam isn’t good enough, or the seam here needs to be better, or it needs to be double seamed, or you don’t have enough lobster in your lobster mac (and cheese),'” he said.
Myron Frazier, senior vice president of private brands and merchandising at Sam’s Club, said the company hopes to build Member’s Mark into a highly respected lifestyle brand. He said the store brand plans to delve deeper into home categories, such as offering more indoor furniture and producing its own line of small appliances.
To launch popular items, he said, merchants look for products that solve customers’ problems, such as simple meals like roast chicken and mix-and-match children’s clothing sets that can help parents get through busy mornings before school.
Like Costco’s Kirkland Signature, Sam’s Club has a private label brand across categories including groceries, home décor and apparel. Its own brand, Member’s Mark, also sells seasonal items such as patio sets and beach towels.
Melissa Repko | CNBC
There are some signs that these measures are paying off. Sam’s Club doesn’t disclose its membership numbers, but it has reported record membership numbers every quarter for more than a year.
In the most recent quarter, customer transaction volume increased 5.4% and average ticket prices fell about 1%, which may indicate that shoppers are choosing more member-marked items. The prices of these products are often lower than domestic brands.
Nicholas said private label sales are growing faster than the store’s other products. He added that as its products grew in popularity, clubs gained leverage to push suppliers to lower prices or increase innovation.
During last month’s earnings call, Walmart chief financial officer John David Rainey credited Membership Marks with driving high single-digit growth in the quarter, saying it was “a significant increase in membership enrollment and renewals.” A growing cause”.
Product quality will help determine whether growth is sustained.
Since 2020, the year the Crozier pool broke, Member’s Mark has launched, tweaked and upgraded more than 1,200 projects.
One of these reformulated projects? Its inflatable pool.
Crozier said it’s working out well now. She added that Sam’s Club carries many of these products.
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