Costco's biggest rival steps up war after hot dog feud - and it's winning over young shoppers
- Walmart's Sam's Club is going full throttle on its bid to catch up to Costco
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Sam's Club is stepping up its battle with Costco - as it bids to fight back against its biggest rival.
Costco is the biggest of the membership-based warehouse chains, with twice the sales of its rival even though they both have the same number of clubs.
The retailers last year went head-to-head over a food court staple - Sam's Club undercut Costco's famous $1.50 hot dog and soda combo by 12 cents.
Now Sam's Club - Walmart's version of Costco - is finding new ways to take get new customers, either grabbing them from its rival or attracting Americans don't belong to a club.
For example, it is offering lower membership fees, investing in its own-label brands and bringing in the latest technology at the checkout. Many of these initiatives appeal to young Gen Z and millennial customers, experts say.
Costco's $1.50 hot dog and soda is a huge hit with members and has been the same price for decades. Sam's Club sells its version for $1.38
Cut-price memberships
In an attempt to compete with Costco Sam's Club offers lower membership costs.
Currently Costco's standard membership is $60-a-year and its executive level is $120.
Sam's Club on the other hand usually offers a $50-a-year club-level membership and $110 for its plus option.
However, recently it has been offering them for as little as $20, a third the price of Costco's.
The auto-renew price is only open to new Sam's Club member or those whose membership lapsed more than six months ago.
Own label investment
Sam's Club's own brand, Member's Mark, remains significantly behind Costco's Kirkland brand in terms of sales.
It is a fact Sam's Club CEO Cris Nicholas is aware of and is keen to close the gap on.
'The club model survives because you have brilliant merchants focusing on creating or buying exceptional items,' Nicholas told CNBC.
'Costco did such a great job of that over the years with Kirkland, and we saw that be successful.'
Member's Mark accounts for around 30 percent of Sam's Club's sales, while Kirkland Signature makes up around 28 percent of Costco.
But Costco's sales are twice that of Sam's Club, so overall it sells many more own-label products.
Sam's Club is investing in its own-brand products to ensure they are 'exclusive designs that use top-of-the-line materials and the highest quality ingredients to make sure they have the best quality and value at members-only prices,' Nicholas explained.
Technology reels in Gen Z
Sam's Club has made a concerted effort to pull ahead of its rivals with new technology, which has paid off by attracting younger customers.
The club rolled out new scan-and-go technology earlier this year with an app and AI powered exit gates.
Sam's Club is stepping up its price war on its biggest rival
Costco, Sam's Club's biggest rival, still generates double the revenue
The update allows customers to scan and pay for groceries on their phone and just walk straight out of the store.
According to Nicolas the app has been well reviewed and customers have responded positively to the gates.
Indeed, the high tech approach appears to be paying off as Sam's Club has increased its Gen Z membership by 68 percent in just two years.
'That's not something typical of the club model, but it's something that we offer, Nicholas said recently.
'That generation believes it's cool to save money, and we agree with them,' he added.
