Gen Z’s Favoring of Sam’s Club Could Pose a Threat to Costco

Warehouse clubs have long been popular with baby boomers and Gen X shoppers, but now they are also gaining a new following from Gen Z. Sam’s Club, which is owned by Walmart, has seen a 68% increase in its Gen Z membership over the past two years. Younger shoppers are beginning to see the value in buying in bulk, and many are now making enough money to do so.

While other warehouse clubs like Costco and BJ’s also offer low prices, Sam’s Club stands out due to its technological offerings. The CEO highlighted that a third of shoppers use the club’s scan-and-go app, and the high customer satisfaction ratings from the AI-powered gateways have been well-received. This technology allows customers to exit the store without needing a person to check their receipt, something that sets Sam’s Club apart.

Sam’s Club’s success with younger members could pose a threat to Costco, even though it may take a while for millennials and Gen Z shoppers to surpass older generations in terms of spending power. Costco lags behind Sam’s Club when it comes to tech innovation, as its focus has traditionally been on its strong physical retail operation. However, consumer preferences are evolving, and shoppers are seeking more than just low prices.

Costco’s strategy of making shopping slightly inconvenient by placing popular items in different parts of the store has been successful in increasing sales. However, its e-commerce operation does not offer the same seamless experience as Sam’s Club. Half of Sam’s Club members are utilizing the company’s digital channels, contributing to growing customer satisfaction scores, engagement, and renewal rates. The convenience and value provided by Sam’s Club are attracting new members and encouraging current ones to recommend the club to others.