As the U.S. economy enters a phase of "stagflation," where prices rise rapidly without growth, consumers are flocking to membership warehouse stores. The strategy of these companies, which offer large-volume products at low prices, is attracting consumers fatigued by rising prices.
The Financial Times (FT) reported on the 29th (local time) in an article titled "Americans tired of rising prices line up to buy toilet paper and cheap Bordeaux wine," that "Costco, Sam's Club, and BJ's Wholesale Club are attracting more customers with their promise to provide carefully selected large-volume products at low prices."
All three companies are membership warehouse discount stores that charge an annual fee, requiring a minimum membership fee of $50 to $65 per year to use the stores. Notably, even after raising membership fees last year, 90% of existing members at BJ's Wholesale Club and Costco chose to renew, and the total number of members continues to increase. Sam's Club has noted that up to 90% of its profits come from membership fees.
FT identified the rise in U.S. consumer prices, which increased by 26% compared to pre-pandemic levels in 2019, as the backdrop for the boom in warehouse discount stores. Recently, concerns about price increases on foreign products have grown due to the tariff policies of the Trump administration.
Despite the recession, sales for the three corporations are increasing. Costco announced that its same-store sales (a metric measuring changes in revenue from existing stores) increased by 7.8% compared to the same period last year. Sam's Club and BJ's also recorded same-store sales growth rates of 6.8% and 3.9%, respectively.
This contrasts with the latest projected same-store sales growth rate of only 2% for Kroger and Albertsons, the major supermarket chains in the U.S. Sales for other major retailers such as Target and Macy’s are also declining. Excluding membership warehouse discount stores, the overall situation in the U.S. retail industry is not favorable.
Consumers perceive that the savings they gain outweigh the membership fees they pay to use the stores. Denise Karasquillo, a mother of three and a member of BJ’s, said, "Having these stores is a great help," adding, "Overall, it might seem to cost a bit more, but if you calculate it well, you can save much more."
The three companies are pressuring major suppliers like Procter & Gamble and Nestlé for price reductions while actively selling competitive private brand (PB) products. Costco's PB brand "Kirkland" and Sam's Club's "Member's Mark" are each valued in the billions of dollars. However, the relatively small number of stores and the need to wait in long lines when shopping are pointed out as drawbacks.
Bolstered by increased popularity, the three companies are rapidly expanding. Costco plans to open 15 new stores this year, while Sam's Club aims to open 15 new stores annually for the time being. BJ’s also announced plans to add 25 to 30 more stores over the next two years. Recently, these companies have begun delivering products from their stores to customers' homes, encroaching on Amazon's territory.
Brian Gildenberg, managing director of Retail Cities, evaluated that "consumers are essentially outsourcing the process of finding cheap products by paying to shop at Sam's Club or Costco."