Tuesday, June 28, 2016

Costco vs. Sam's Club (South Seattle Edition)

June 28, 2016
Sam's Club is firing shots at Costco after the credit card swap disaster

On Saturday, Sam's Club announced that, until July 4, Costco Membership Cards could serve as free Sam's Club Cards — noting that Sam's Club accepts all major credit cards, unlike Costco. Typically, only members can shop at Sam's Club, with an annual membership costing at least $45 a year.

Simce we have memberships at both chains, I thought I'd offer a few personal comments about the Costco credit card debacle.

I think Sam's Club is the one desperately in trouble, at least in my area. Here's why.

1. The Sam's Club parking lot is never full. Their store is never full. Their checkout lanes are never full. As a customer, this is clearly a desirable situation. To an investor, not so much though.

2. The Costco parking lot is always packed. Their store is always packed. Their checkout lanes are always packed. As a customer, this is clearly not a desirable situation. To an investor, it is ideal.

3. Since Costco is always packed and Sam's Club never is, Costco can afford to offer us better deals. I think they do. When I see something priced at Costco, I don't try to second guess if it is a good deal. I generally know it is.

4. When I see something priced at Sam's Club, I do second guess it. Why? There is a particular bag of chips that Walmart also sold. It wasn't exactly the same size bag. Sam's Club's bag was slightly bigger. It has always bothered me that the cost per ounce was higher at Sam's Club, a place where I pay a membership fee. I therefore never trust a Sam's Club price to be fair, nor will I ever.

5. We spend more money at Costco than we do at Sam's Club even though Sam's Club is closer to us. That is not a good sign for Sam's Club over the long-term. It's the more pleasant store to shop in, because it isn't packed. You'd therefore think we'd buy more there. We shop there more often, for the convenience, but we actually buy less. Why? I can give you one reason. Since Sam's Club has fewer customers buying their bulk goods, I suspect their products don't turn over as fast. This leads to expiration date problems from time to time. If you are buying bulk goods, you need to see excellent expiration dates. We sometimes don't at Sam's Club.

6. I have never owned an American Express card and never will, perhaps somewhat out of stubbornness. I prefer a thin wallet. I use one and only one credit card. It's a Visa. I am so pleased that I will never need to take my checkbook to Costco again. Such a pain it has been. Yeah, first world problem. I know! More times than not, a supervisor needed to verify my check. So there I would wait, like a suspected terrorist needing a background check. The nightmare is finally over! Hurray! Thanks Costco!

7. Sam's Club took my Visa. Now Costco does too. Not good for Sam's Club. If I could choose only one store, it would be Costco. Sam's Club would get dropped in a heartbeat.

8. So why do we shop at Sam's Club? They had fantastic prices on some generic medicines, both for us and our pets. The key word being had. Makes me wonder if some weren't just incompetently mispriced. There are things they sell that Costco doesn't. We're particularly fond of Hershey's dark chocolate, for example. Since the store is mostly free of other customers and closer to our house, many of the refrigerated perishables are often bought there. The milk is especially good. Instead of buying a two gallon pack at Costco, we can buy a gallon of skim and a gallon of 2% at Sam's. And for whatever reason, I prefer the taste of Darigold. They used to sell bulk Cracker Jack. I love that stuff. Don't now though. Do we still buy enough there to justify the membership fee? I ask myself that every month. It's a close call, at best. Would not take much for us to drop the membership. Let's just put it that way. That's especially true since one of our dogs no longer gets her medication there. We'll see what happens at renewal time. They should not be optimistic.

9. We don't get too attached to our local Sam's Club, mainly because we wonder how long it will be there. They are losing the race with the nearby Costco, by a wide margin, and what could possibly change that? Costco's credit card debacle? Don't make me laugh. At least for me, I welcome the change. Big time. Does it seriously annoy many customers who are forced to make a change? I'm sure it does. Will anyone care five years from now? I could be wrong, but I doubt it. I really don't think my local Sam's Club knows how to cater to the needs of fast-moving disgruntled American Express card holders. It's a very laid back environment. Time moves slower in a Sam's Club. Everything is so leisurely. We'll see!


mab said...

Never been to a Sam's Club. We use BJs.

By most accounts, Costco is a better value. But the Costco store would add about twenty minutes to the trip and the lines are ungodly much of the time.

The gas at Costco is always the cheapest around and you don't need a membership, but again, the lines are looooonnng. Not worth a second annual membership for us.

I so like buying in bulk! Fewer trips, lower cost, more free time!

Stagflationary Mark said...


We go to Costco no more than once a month. It's an ordeal. Fewer trips for the win!

No attempt is made to find a good parking spot. I've fallen for that in the past and got trapped like a bug in a Roach Motel. The area near the entrance is especially sticky. I see people waste so much time trying to park there, and so much time trying to leave.

When reporters say that the freeway is like a parking lot, I always wonder what kind. A Sam's Club parking lot or a Costco one? Huge difference! ;)

Who Struck John said...

Several of the new staples of my recently, severely altered diet are available in bulk at Costco. I foresee spending considerably more at Costco than I used to do.

That said, it's been the bulk goods that have seemed like the best deal. Perishables, not so much.

Stagflationary Mark said...

Yeah, perishables are really hit or miss. Got a big bag of good looking potatoes once, but weren't so good looking on the inside after they arrived at home.

So now I just stick to things tgat are obviously either good or bad, like mushrooms. Sometimes they look good and sometimes they don't. If they look good though, they are good. So mushrooms are always on the list but with an implied question mark.

Generally stick to the frozen goods though. Like their frozen blueberries, for example. Yum!

mr slippery said...

First, glad to see a fresh post. Lots of economics to comment on lately.

Second. Your breakdown is exactly how people think. Nuances that make Sam's Club better to shop at but are bad for business. Wal*Mart is a grown ass business so I don't feel sorry for them, but they are fighting two Seattle titans: Costco AND Amazon. I think Wal*Mart has made progress on the web front but they are still way behind Amazon.

I have never shopped as Sam's Club because there isn't one anywhere near me. Costco's are everywhere. I love that they switched to Visa. We were using debit cards before. Amex doesn't have a value proposition for me. Worse for Sams and Wal*Mart, our Visa is an Amazon Prime Rewards.

So, we used to buy a variety of things from Costco, but now it's mostly down to Kirkland bulk paper products, bottled water, and sometimes food items. We've been using Amazon Fresh for doorstop delivery for over a year. They have 90% of what we buy and we fill in the holes with Costco and an infrequent visit to Von's (Safeway owned). When I do go to Costco, it's an early morning lightning raid. They usually open 5-10 minutes before they officially open, so I am there at least 10 minutes early with a cart, standing in line to race through the empty aisles. I usually find an empty checkout line after gathering my stuff.

RIP Sam's Club.

Stagflationary Mark said...

mr slippery,

Not a fresh post! It just seems like it because my local Sam’s Club store finally closed like I predicted back in 2016 that it probably would. ;)

I feel sorry for the Sam’s Club employees who lost their jobs. Costco won the battle though and by a wide margin. Not the fault of the employees! As I said in this post, it was the better store to shop in, at least for me, due to its lack of customers. Made it easy to get in and out quickly. They even had a self service checkout that was awesomely quick.

Should never have opened this store so close to an established Costco in the first place. It was a bad management decision.

mr slippery said...

Doh! Should have checked the date.

Seattle is enemy territory. Maybe not the best strategy. Well, it would be OK if they had a better offering, but they don't.