Dive Brief:
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Sam’s Club is attempting to capitalize on Costco’s credit card woes by granting Costco members free admission to shop at Sam’s Club stores through July 4, Fortune reports.
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Despite months of preparation for its switch from American Express to Citi Visa for its store-branded credit card, Costco is facing a backlash from members who haven’t received the new card or who can’t activate it, leaving them unable to use their card at the retailer since the switch became official last week.
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Sam’s Club also announced same-day delivery services earlier this month, part of its efforts to increase its customer base and compete with Costco.
Dive Insight:
Sam’s Club has been chasing Costco for years but hasn’t been able to achieve Costco’s sales or membership levels, its wealthier customer base, or its reputation for good service. The retailer has consistently beat Sam's Club in same-store sales growth for more than two years, according to TheStreet.
But Costco's recent woes with its switch from American Express store-branded cards to Visa seems to be an opportunity for Sam's Club. The credit-card debacle is especially problematic for Costco because the retailer bases most of its profits on membership fees in order to keep prices low. Paid memberships at Costco grew at a compounded annual growth rate of 7.1% over the past five years to 44.6 million last fiscal year, according to Market Realist. And Costco’s renewal rate in the U.S. and Canada went from a healthy 88% in fiscal 2010 to 91% in fiscal 2015.
The trouble for Sam’s Club is that Costco’s advantages, which include strong merchandising and (outside of this presumably temporary setback) stellar customer service, are enduring and outsized.
“Costco is, in its own way, as unstoppable as Amazon,” Columbia University retail studies professor Mark Cohen wrote in Forbes earlier this year. "Their stores throughout the world are among the most productive in the industry. And unlike most brick-and-mortar based retail businesses, seemingly untouched by customers’ stampede-like migration to the internet.”
In that case, Costco may be wise to counter Sam’s Club’s latest offer and allow Sam's Club members to shop there in the same time frame.
