<div id="readability-page-1"><span></span><div><div id="Placeholder-ArticleBody-Video-107430034"><div id="InlineVideo-0"><div><p><img src="https://imageproxy.pbkrs.com/https://image.cnbcfm.com/api/v1/image/107244694-1684766720959-gettyimages-1249944978-COSTCO_GRAND_OPENING.jpeg/query-aD00MjImdj0xNzE5NDI3MTU2JnZ0Y3JvcD15Jnc9NzUw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="750" height="422" original-src="https://imageproxy.pbkrs.com/https://image.cnbcfm.com/api/v1/image/107244694-1684766720959-gettyimages-1249944978-COSTCO_GRAND_OPENING.jpeg/query-aD00MjImdj0xNzE5NDI3MTU2JnZ0Y3JvcD15Jnc9NzUw"/><span></span><span></span></p></div></div></div></div><div><p>Stuck at home during the Covid pandemic, Megan Crozier needed a way to keep her two young children entertained. She bought an inflatable pool from Sam's Club.</p><p>The pool began leaking air after just a few uses.</p><p>For Crozier, chief merchant of the <span id="RegularArticle-QuoteInBody-1">Walmart<span><span id="-WatchlistDropdown"></span></span></span>-owned membership club, that trashed pool — and the disappointment that came with it — helped kickstart a years-long effort to catch up with chief rival <span id="RegularArticle-QuoteInBody-2">Costco<span><span id="-WatchlistDropdown"></span></span></span> and the popularity of its private brand, Kirkland Signature.</p><p>As Sam's Club opens more locations, it is trying to raise the bar for its own brand, Member's Mark. The label's makeover has become critical for Sam's Club as it aims to close the gap with Costco, which has roughly the same number of U.S. clubs but about twice as much annual revenue. Net sales for Sam's Club totaled $86.2 billion in its most recent fiscal year, compared with $176.63 billion for Costco's U.S. clubs.</p><p>Sam's Club CEO Chris Nicholas told CNBC the brand's revamp was inspired, in part, by the retailer's chief rival.</p><p>&#34;The club model survives because you have brilliant merchants focusing on creating or buying exceptional items,&#34; he said in an interview. &#34;Costco did such a great job of that over the years with Kirkland and we saw that be successful.&#34;</p><p>The success of Member's Mark will help determine how Sam's Club fares as its expands, with plans to open more than 30 stores over the next four years. At least some stores will be in regions where potential customers belong to a competing club like Costco or <span id="RegularArticle-QuoteInBody-5">B.J.'s Wholesale<span><span id="-WatchlistDropdown"></span></span></span>, or in areas where customers may need convincing to pay an annual membership to be able to shop.</p><p>Overtaking Costco and its beloved private label won't be easy for Sam's Club, said<strong> </strong>Michael Baker, a retail analyst for D.A. Davidson.</p><p>&#34;Never say never,&#34; he said. &#34;Who knows? But I think it's going to take a long time.&#34;</p><p>But he added Costco's success with Kirkland Signature created a formula that Sam's Club can follow.</p><p>The popularity of Kirkland's brand, which includes a diverse range of items like vodka, batteries and dress shirts, has helped to drive membership sign-ups and renewals. It is one of the features that Costco highlights when the retailer's pitch to members.</p></div><div id="ArticleBody-InlineImage-107433625"><div><div><p>In this photo illustration, Sam's Club's private label Member's Mark is seen versus Costco's Kirkland Signature label.</p><p>Natalie Rice | CNBC</p></div></div></div><h2>Private label wars heat up</h2><div><p>Sam's Club has more reasons than its rivalry with Costco<strong> </strong>to step up its private label game.</p><p>The brands' stigma of inferior quality or cheaper knockoffs of national name brands has faded as retailers including <span id="RegularArticle-QuoteInBody-7">Kroger<span><span id="-WatchlistDropdown"></span></span></span>, <span id="RegularArticle-QuoteInBody-8">Target<span><span id="-WatchlistDropdown"></span></span></span> and <span id="RegularArticle-QuoteInBody-9">Walmart<span><span id="-WatchlistDropdown"></span></span></span> have introduced their own labels with unique flavors and exclusive items.</p><p>Baker credits Kirkland for helping with that since Costco launched the brand in 1995.</p><p>&#34;They didn't invent the idea of private label,&#34; he said. &#34;But I think what they changed or made revolutionary is that it can be a high quality product.&#34;</p></div><div id="ArticleBody-InlineImage-107244694"><div><div><p>Jordan Vonderhaar | Bloomberg | Getty Images</p></div></div></div><div><p>Other factors have turned the tide. Consumers experimented with new brands during the Covid pandemic when they couldn't find their typical purchases on shelves. Some fast-growing grocers, including Trader Joe's, Aldi and Lidl, have fueled growth almost entirely through their own brands. And stubborn inflation also pushed more consumers to buy a store's own brand to save some bucks.</p><p>Sales of private label increased 34% between 2019 and 2023 to $236.3 billion, according to the annual report by the Private Label Manufacturers Association, which is conducted by market research firm Circana.</p><p>Exclusive offerings, such as products you can't find anywhere else, are even more essential for clubs, which require shoppers to pay a membership fee. Annual fees cost $60 at Costco and $50 at Sam's Club. Each also has a higher-tier membership: $120 at Costco and $110 at Sam's Club. (Costco is widely expected to raise its annual fee soon, based on its history of doing so.)</p><p>At Sam's Club, Member's Mark accounts for roughly 30% of sales in terms of dollars and more than one-third of sales in terms of units. Kirkland accounts for about 28% of Costco's annual sales.</p><p>Costco declined interview requests for this story.</p></div><div id="ArticleBody-InlineImage-107433604"><div><div><p>Sam's Club is trying to raise the quality of Member's Mark. It showed off apparel, food and other items from the private brand to investors and reporters in early June at an event near its Bentonville, Ark. headquarters.</p><p>Melissa Repko | CNBC</p></div></div></div><h2>A makeover for Member's Mark</h2><div><p>Over the past several years, Sam's Club has consolidated its private labels from more than 20 different brands into a single one: Member's Mark. It announced new goals for food and merchandise standards that it aims to reach in 2025, such as switching to antibiotic-free poultry and fair trade certified coffee beans.</p><p>And it recently launched a program that allows customers to help co-create Member's Mark items by giving feedback on flavors, design and more before the retailer green lights an item for the shelf.</p><p>Nicholas said customers don't hold back. &#34;They are exacting, like, 'Hey, this seam is not good enough or the stitching here needs to be better or this needs to be double stitched or you haven't got enough lobster in your lobster mac [and cheese],'&#34; he said.</p><p>Myron Frazier, Sam's Club senior vice president of private brands and sourcing, said the company wants to turn Member's Mark into a well-respected lifestyle brand. He said the store brand plans to go deeper in home categories, such as offering more indoor furniture and making its own line of small appliances.</p><p>To come up with popular items, he said merchants have sought out products that solve customers' problems, such as easy meals like chicken rotisserie bites and mix-and-match kids' clothing sets that can help parents on a hectic morning before school.</p></div><div id="ArticleBody-InlineImage-107433598"><div><div><p>Like Costco's Kirkland Signature, Sam's Club has a private brand that cuts across categories including grocery, home decor and apparel. Its private brand, Member's Mark, also carries seasonal items like patio sets and beach towels.</p><p>Melissa Repko | CNBC</p></div></div></div><div><p>Some signs indicate the moves are paying off. Sam's Club does not share its membership number, but it has reported a record number of members in each consecutive quarter for more than a year.</p><p>Customer transactions rose 5.4% and the average ticket declined about 1% in the most recent quarter, which could point to shoppers opting more for Member's Mark items. The products tend to cost less than national brands.</p><p>Nicholas said sales growth of the private brand has outpaced the rest of the store. He added that as its items gain popularity, the club gains leverage to push suppliers to lower prices or step up innovation.</p><p>On an earnings call last month, Walmart finance chief John David Rainey credited Member's Mark for driving the quarter's high single-digit growth and said it is &#34;a growing reason why members join and renew.&#34;</p><p>Product quality will help to determine whether the growth continues.</p><p>Since 2020, the year when Crozier's pool broke, Member's Mark has launched, tweaked and upgraded more than 1,200 items.</p><p>One of those reformulated items? Its inflatable pool.</p><p>Crozier said it works well now. And she added that Sam's Club sells a lot of them.</p></div><div><div id="RegularArticle-RelatedContent-1"><div><div><h2>Don’t miss these insights from CNBC PRO</h2><div><ul><li>These Nasdaq stocks are expected to fall as the latter half of the year begins</li><li>Fundstrat’s Tom Lee keeps making bold stock calls — and nailing them</li><li>Nvidia made chart history that could mark the stock’s top, says BTIG</li><li>S&amp;P 500 levels to watch if troubling chart patterns in Nvidia and other tech mean a sell-off is near</li></ul></div></div></div></div></div></div>

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<p>Sam's Club, owned by Walmart, is taking steps to compete with Costco's private label Kirkland Signature. Sam's Club aims to raise the quality of its own brand, Member's Mark, in order to close the revenue gap with Costco. The success of Member's Mark will play a role in Sam's Club's expansion plans. While it won't be easy to overtake Costco, Sam's Club is inspired by Costco's success with Kirkland Signature and believes it can follow a similar formula. The popularity of private labels has been on the rise, and Sam's Club wants to capitalize on this trend.</p>

- Sam's Club aims to revamp its private brand, Member's Mark, inspired by Costco's success with Kirkland Signature. The move is crucial as Sam's Club seeks to narrow the revenue gap with Costco, planning to open more stores and enhance its brand image.
- Member's Mark accounts for a significant portion of Sam's Club sales, with efforts to improve quality and expand offerings. The retailer consolidates various private labels into Member's Mark, focusing on customer feedback and innovation to compete in the private label market.
- Sam's Club's strategy includes offering unique products, engaging customers in product development, and enhancing quality standards to drive growth and membership retention, following the footsteps of Costco's Kirkland Signature success.

How Walmart-owned Sam's Club is trying to take on Costco's private label Kirkland