For Crozier, head merchant of the Walmart-owned club, that trashed pool — and the disappointment that accompanied it — helped reignite a years-long effort to catch up with its main rival Costco and the popularity of its private label, Kirkland Signature .
As Sam’s Club opens more locations, it’s trying to raise the bar for its own brand, Member’s Mark. The label makeover has become crucial for Sam’s Club as it aims to narrow the gap with Costco, which has roughly the same number of U.S. clubs but about twice as much annual revenue. Sam’s Club’s net sales totaled $86.2 billion in its most recent fiscal year, compared with $176.63 billion for Costco’s U.S. clubs.
Chris Nicholas, CEO of Sam’s Club, told CNBC that the brand overhaul was inspired, in part, by the retailer’s main rival.
“The club model survives because you have brilliant merchants who are focused on creating or purchasing great items,” he said in an interview. “Costco has done a great job over the years with Kirkland and we’ve seen it succeed.”
The success of Member’s Mark will help determine how Sam’s Club performs as it expands, with plans to open more than 30 stores over the next four years. At least some stores will be located in areas where potential customers belong to a competing club like Costco or BJ’s Wholesale, or in areas where customers may need to be convinced to pay an annual membership in order to shop.
Overtaking Costco and its beloved private label won’t be easy for Sam’s Club, said Michael Baker, retail analyst for DA Davidson.
“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 formula that Sam’s Club can follow.
The popularity of the Kirkland brand, which includes a diverse line of items like vodka, batteries and dress shirts, has helped drive membership registrations and renewals. This is one of the features Costco highlights when introducing the retailer to members.
In this photo illustration, Sam’s Club’s private label Member’s Mark is seen in comparison to Costco’s Kirkland Signature brand.
Natalie Rice | CNBC
Sam’s Club has more reasons than just rivaling Costco to step up its private label game.
The stigma of brands being inferior quality or cheaper knockoffs of national brands has faded as retailers such as Kroger, Target and Walmart have introduced their own brands with unique flavors and exclusive items.
Baker credits Kirkland for its help since Costco launched the brand in 1995.
“They didn’t invent the idea of private label,” he said. “But I think what they’ve changed or made revolutionary is that it can be a high-quality product.”
Jordan Vonderhaar | Bloomberg | Getty Images
Other factors reversed the trend. Consumers have been experimenting with new brands during the Covid pandemic when they couldn’t find their usual purchases on the shelves. Some fast-growing grocers, including Trader Joe’s, Aldi and Lidl, have fueled their growth almost entirely through their own brands. And stubborn inflation has also pushed more consumers to buy a store’s own brand to save a few dollars.
Private label sales grew 34% between 2019 and 2023 to $236.3 billion, according to the Private Label Manufacturers Association’s annual report, conducted by market research firm Circana.
Exclusive offers, like products you can’t find anywhere else, are even more essential for clubs, which require customers to pay an annual membership fee. Annual membership fees cost $60 at Costco and $50 at Sam’s Club. Each also offers a higher membership tier: $120 at Costco and $110 at Sam’s Club. (Costco is widely expected to raise its annual membership fees soon, given its history of doing so.)
At Sam’s Club, Member’s Mark represents approximately 30% of sales in dollar terms and more than a third of sales in unit terms. Kirkland accounts for about 28% of Costco’s annual sales.
Costco declined interview requests for this story.
Sam’s Club is trying to improve the quality of Member’s Mark. In early June, the company introduced clothing, food and other items from its private label to investors and journalists at an event near its headquarters in Bentonville, Ark.
Melissa Repko | CNBC
Over the past few years, Sam’s Club has consolidated its private brands from more than 20 different brands into one: Member’s Mark. It announced new targets for food and commodity standards that it aims to achieve in 2025, such as switching to antibiotic-free poultry and fair trade-certified coffee beans.
And it recently launched a program that lets customers help co-create Member’s Mark items by providing feedback on flavors, design and more before the retailer greenlights an item for sales on the shelves.
Nicholas said customers don’t mind. “They’re demanding, like, ‘Hey, this seam isn’t good enough or this seam here needs to be better or this one needs to be sewn twice or you don’t have enough lobster in your lobster mac ( and cheese)’,” he said.
Myron Frazier, senior vice president of private brands and sourcing at Sam’s Club, said the company wants to make Member’s Mark a well-respected lifestyle brand. He said the store brand plans to move further into home categories, such as offering more indoor furniture and making its own line of small appliances.
To offer popular items, he said, marketers have sought products that solve customer problems, such as easy meals like roast chicken bites and matching children’s clothing sets that can help customers. parents on a busy morning before school.
Like Costco’s Kirkland Signature, Sam’s Club has a private label that spans several categories, including groceries, home decor and clothing. Its private label, Member’s Mark, also offers seasonal items like patio sets and beach towels.
Melissa Repko | CNBC
There are signs that these measures are working. Sam’s Club doesn’t share its membership number, but it has reported record numbers of members in each consecutive quarter for more than a year.
Customer transactions increased 5.4% and the average ticket decreased about 1% in the most recent quarter, which could indicate that shoppers are opting more for Member’s Mark items. Products tend to cost less than national brands.
Nicholas said private label sales growth had outpaced that of the rest of the store. He added that as its items gain popularity, the club gains influence to push suppliers to lower prices or step up innovation.
During an earnings conference call last month, Walmart Chief Financial Officer John David Rainey credited Member’s Mark for driving the quarter’s high-single-digit growth and said it was “a growing reason for which members join and renew”.
Product quality will help determine whether growth continues.
Since 2020, when Crozier’s pool broke, Member’s Mark has launched, tweaked, and improved more than 1,200 articles.
One of these rephrased items? Its inflatable swimming pool.
Crozier said it’s working well now. And she added that Sam’s Club sells a lot of it.