--- title: "The 'Costco' inside WMT: Sam's Club playbook and countermoves" type: "Topics" locale: "en" url: "https://longbridge.com/en/topics/41626891.md" description: "This is the third installment of our Walmart deep dive, focusing on Sam's Club — long ignored by investors yet effectively Walmart's third growth engine — and a hard comparison against Costco, the global benchmark for warehouse clubs. Let's get straight to it: WMT." datetime: "2026-06-09T11:08:22.000Z" locales: - [en](https://longbridge.com/en/topics/41626891.md) - [zh-CN](https://longbridge.com/zh-CN/topics/41626891.md) - [zh-HK](https://longbridge.com/zh-HK/topics/41626891.md) author: "[Dolphin Research](https://longbridge.com/en/news/dolphin.md)" --- # The 'Costco' inside WMT: Sam's Club playbook and countermoves This is the third deep dive on Walmart, focused on Sam's Club — a long-overlooked yet clear third growth pillar — and a hard-nosed comparison with global warehouse-club benchmark Costco. Let's get straight to it: $Walmart(WMT.US) **I. Sam's Club (U.S.): A long-distance runner catching up to Costco** Start with core numbers: in FY2026, Sam's U.S. revenue is approx. $93 bn, OP around $2.4 bn, with OPM at ~2.6%. If you only look at this, many investors might conclude Sam's is mediocre, with margins well below Walmart U.S.'s ~5%+ OPM. But that's the point — Sam's shouldn't be viewed through a conventional retail lens. Based on our checks, roughly 90% of Sam's OP comes from membership fees, while the core merch business runs at break-even or low single-digit margins. Put simply, products are a trust vehicle to build stickiness, and membership fees are the high-quality profit that compounds over time. This is the engine. Like Costco, the warehouse-club model is extreme by design: the goods don't have to earn much, but the member must stay. As long as renewals hold, the model naturally exhibits high repeat purchase, robust cash generation, and strong retention. That's the flywheel. Sam's closest comp is Costco. Both run membership clubs, sell in bulk packs, and emphasize high turns and low markups; we'll first compare scale and efficiency. Then we go deeper. **Similar store counts, but Costco earns much more:** Sam's (U.S.) has 601 clubs vs. Costco's 633, roughly the same scale. But Costco's member base and revenue are about 2x Sam's. Efficiency metrics from Dolphin Research show the real gap is output per member, per SKU, and per sq ft. That's where Costco pulls ahead. Why? Two reasons: **1) Costco runs a more concentrated SKU strategy:** Among the big three North American warehouse clubs (Costco, Sam's, BJ's), Costco offers the fewest SKUs at ~3,800–4,000 (Sam's ~5,000–6,000; BJ's ~5,500–7,500). This stems from Costco's founding retail philosophy: trusted professional buyers make most non-essential choices for consumers. Fewer SKUs mean more concentrated demand per item. Milk may be one or two hero SKUs; nuts are a handful of core items. With volume concentrated, vendor terms, purchasing scale, logistics efficiency, and inventory turns all improve. **2) Costco's positioning is more pure:** Costco has long stuck to a pure warehouse-club model, continuously trimming SKUs, leaning into private label (Kirkland), and stripping operational redundancy to build a tight 'low price–high turns–larger scale–lower price' loop. This single-minded strategy has cemented Costco as the primary destination for U.S. household bulk purchases, characterized by concentrated, larger-ticket, and need-based spending. You see it in annual spend per member (~$3,300), which captures a core share of the household wallet. That is brand position converted into dollars. Sam's, backed by Walmart, did not fully break from the hypermarket mindset early on: it tried to do warehouse club with bulk packs and membership, while also broadening SKUs, adding niche categories, and accommodating fragmented shopping. This blurred positioning left supply-chain playbooks, assortment structure, and user perception short of 'extreme'. As a result, Sam's never grabbed the 'primary purchase venue' tag in U.S. consumers' minds. It is often viewed as a high-quality supplement channel, with lower visit frequency and weaker spending concentration. Annual spend per member is only ~$1,900. Recognizing the lack of purity and efficiency gaps, Sam's chose a different lane: rather than copy Costco's low-price hero-SKU playbook, it pursued two angles — differentiated private label and digital fulfillment — for a dislocated competition path. That's the catch-up strategy. **Catching-up path 1: Member's Mark — fix the 'brand asset' shortfall first** One basic issue in chasing Costco: Kirkland is a 'buy-with-eyes-closed' trust mark for Costco members, whereas before 2017, Sam's private labels were fragmented, inconsistently positioned, and lacked a unified perception. Roughly 20 sub-brands operated independently, making it hard to build Kirkland-grade trust. Sam's first move was to consolidate all private-label assets under the Member's Mark umbrella. Beyond unification, it smartly staked a mindshare territory Costco hadn't locked: health. In 2022, Sam's launched the 'Made Without' initiative, aiming to eliminate 40+ controversial ingredients — artificial colors, aspartame, high-fructose corn syrup, etc. — from all Member's Mark F&B products. By Jan 2026, it achieved 100% compliance. The point is, Sam's avoided head-on sameness on 'who's cheaper' and pushed differentiation toward ingredient transparency, clean labels, and verifiable health. It played to its strengths. It went further by bringing members into product development. Through the Member's Mark Community, members help decide colors, styles, and flavors of new SKUs. Member-driven launches now account for ~50% of new selections, and nearly half of new members are Millennials and Gen Z, who favor brand interaction and enable efficient co-creation. Per company calls, roughly half of Sam's merch sales growth over the past two years came from Member's Mark. In warehouse clubs, a proven, unified brand can absorb part of the selection and trust-conversion function, lowering trial costs and lifting repeat rates. **Catching-up path 2: Digital — Sam's real 'overtake' weapon** If brand work closed the quality gap, digital is the dimension where Sam's can outgun Costco, leveraging Walmart Group's tech stack. Think of it as combined arms. In practice, Sam's directly taps Walmart's Spark local fulfillment network, plugs into Walmart's in-house Ellipse AI for inventory and demand forecasting, and integrates Google's Gemini conversational personalization in shopping journeys alongside Walmart. Sam's can 'plug-and-play' mature infrastructure and scale fast. Costco, as an independent company, must build from scratch or buy externally, making it hard to replicate the end-to-end tech synergies that come from a parent stack. That's a structural edge. Beyond back-end reuse of Walmart's digital systems, Sam's most distinctive front-end consumer feature — with deepest penetration and true moat — is Scan & Go, developed by Walmart Group and deployed at scale by Sam's. This is where behavior changes. Sam's launched Scan & Go in 2016: members scan barcodes via the app and pay on the phone, no checkout lines needed. By 2025, Scan & Go accounts for 35% of transactions, rising ~5 pts per year for the past three years. The feature integrates with Sam's AI exit-verification gate, allowing automatic receipt checks at the exit post-payment. Overall exit time is down 23%, significantly improving the shopping experience. The moat isn't 'scan to pay' itself — rivals can ship similar features. It's full-category coverage, high-concurrency stability, low shrink from missed scans, and deep integration with inventory, fulfillment, and membership systems — a heavy, long-cycle systems project at heart. By contrast, Costco still relies mainly on staffed checkouts, with limited scan-to-pay pilots (only 27 clubs as of end-2025). Far from Sam's closed-loop capability. The bigger impact is how it reshapes member behavior: Scan & Go builds a full conversion funnel — self-checkout via scan → habit formation in the app → try online ordering → high-frequency platform touchpoints → cross-category penetration → higher total spend → steadily higher renewal rates. It converts low-frequency store-only users into high-stickiness members active across online and offline. Each scan and payment digitizes the event, feeding Ellipse's forecasting and Gemini's personalization engines, improving selection precision, content matching, and replenishment efficiency. Data tightens the loop. Per company calls, heavy Scan & Go users spend 3x more than offline-only members, with renewal rates ~10% higher. Sam's e-com penetration is now ~18%, well above Costco's ~9%, and has grown 20%+ for multiple consecutive quarters. The thesis holds in the data. Overall, since 2021, Sam's Club's North America sales per sq ft gap vs. Costco has been slowly narrowing. But structural differences in model DNA, global purchasing scale, and inventory turns imply the catch-up will be gradual. **II. Sam's Club China: The most overlooked growth engine within Walmart** In the U.S., Sam's still trails Costco on PSF, a gap hard to close near term. In China, the consumer substrate is different, and Sam's broke out of the U.S.-style warehouse-club mold to run a localized playbook, making China its brightest and fastest-growing global market. Key data: in 2025, Sam's China sales exceeded RMB 140 bn. With only 63 clubs, it contributed over 80% of Walmart China revenue, equals roughly two RT-Mart chains, and is 14x Costco China. More importantly, Sam's China is still growing ~40% on a 100+ bn base, rare in China's retail landscape. Warehouse clubs are not an easy business in China — operator demands are near-exacting. You need global sourcing and curation muscle to anchor 'quality trust', local R&D for hero SKUs, and the ability to reconcile 'high ticket bulk packs' with China's expectation for instant delivery. Miss one link and the model breaks. Local players like Hema X Club, Yonghui warehouse, and RT-Mart M Club mostly retreated after failing in supply chain depth, product strength, or member mindshare. The question is how Sam's scaled fast under such constraints, and how it differs from its U.S. play. Two things stand out: **1) Proactive hero-SKU strategy, driven by annual flagship items** Early on, Sam's China relied heavily on U.S. allocations with ~6,000 SKUs, but that supply logic didn't fit Chinese household dining and consumption psychology. It needed a reset. Since 2009, Sam's cut SKUs to ~4,000–4,200 (similar to Costco U.S.), keeping 2–3 head items per subcategory and rebuilding assortments around Chinese family dining and everyday life scenarios. Focus improved throughput. In the U.S., core SKUs and private formulas are set by Walmart global HQ, with Member's Mark anchored in long-life staples (nuts, frozen prepared foods, home care, meat). Annual zero-to-one local hero SKUs are rare, with most 'newness' being spec or flavor tweaks. Incremental vs. breakthrough. By contrast, Sam's China mandates the team to incubate 10 exclusive hero SKUs every year as baseline traffic drivers — the most important difference in merch strategy. It builds momentum by design. Sam's China starts with scenario recognition. Durian mille crêpe cakes, mochi, and Swiss rolls — none came from U.S. templates — are iterated around three high-frequency scenarios: family gatherings, office afternoon tea, and social sharing among friends. The scene defines the brief. All three share a key trait: the purchase decision is social, not purely individual. That means the selection team optimizes not just for 'a tasty cake', but for 'the highest-win product in social scenarios'. That's a different target function. With scenarios set, product design follows a core equation — 'perceived quality \> price expectation = positive surprise' — and Sam's deepens OEM engagement end-to-end from formula design and ingredient spec to process standards and QC, rather than simple white-labeling. Control drives consistency. Take the Swiss roll: Sam's requires OEM Ensichun to use dairy cream instead of vegetable cream, ban added flavoring, swap standard flour for cleaner baking premix, and even codify sponge fluffiness and cream whip ratios. Ingredient quality must exceed peers at the same price, and large-pack formats amplify perceived value. Once the 'positive surprise' hits, the item naturally gains social-currency attributes — worth photographing, sharing, and recommending. Sam's barely needs traditional ads; KOCs on Xiaohongshu and Douyin organically seed and scale awareness. The product becomes the ad, with near-zero CAC. When a SKU enters Sam's system, Sam's commits annual capacity and volume to suppliers in exchange for lower procurement costs and tighter QC cooperation. This volume-for-price model gives Sam's structural cost and execution advantages over copycats — rivals can use the same factory but won't get the same pricing or adherence to specs. The true moat is organizational: consumer insight → scenario selection → deep supply-chain control → data feedback and iteration. That differentiates Sam's from Costco (more reliant on global staples transplantation) and local warehouse rivals (limited by supply-chain depth). It is capability, not a single hit. **2) Instant retail reshapes the club: a hybrid of big-box + dark stores** Beyond the hero-SKU strategy, Sam's China's more important leap is its embrace of instant retail — the most overlooked yet critical driver. This is the game-changer. The U.S.-style warehouse assumption is: members will drive to suburban clubs for big basket shops, seeking 'bulk packs + low unit prices + stock-up'. That premise breaks in China. Chinese Tier-1/2 households face long commutes, small storage, high penetration of instant retail, and mature mobile ordering habits. Consumers have been trained by food delivery and instant commerce to expect 'delivery within one hour' as default. Time sensitivity is the norm. Pure offline big-box is disadvantaged in this context, as consumers won't pay the time cost of 'low frequency + long distance'. Frequency must rise. Sam's recognized this and chose not to simply densify stores, but to move the fulfillment network closer to consumers. Proximity over footprint. Specifically, Sam's rebuilt a three-layer fulfillment network around clubs: national center DCs for allocation and bulk inventory, clubs serving as retail floors and regional inventory/sorting hubs, and cloud/dark stores close to communities for instant delivery. Coverage before capex. Each club manages 8–15 cloud/dark nodes. By end-2025, Sam's had ~600 cloud/dark sites across ~25 cities, delivering '3km within 1 hour, 10km within 30 minutes' in core zones. Speed as table stakes. Crucially, Sam's did not abandon big-box; it made clubs the backbone of instant retail networks. Conventional wisdom pits 'big-box = far, low frequency, heavy asset' against 'dark stores = near, high frequency, light asset'. Sam's fused them: clubs provide experience, brand showcase, core inventory, and member ops; dark stores drive fulfillment penetration and visit frequency. A hybrid organism. As shown below, Sam's China online sales mix rose from ~25% in 2020 to ~50% in 2025, now roughly matching offline. Sam's converted low-frequency club traffic into high-frequency household daily consumption, amplifying the membership, hero-SKU, and private-label flywheels. By comparison, Costco only launched online delivery in early 2024 in China, with RMB 299 minimum order and RMB 20 delivery fee, while Sam's offers free shipping above RMB 99. The key is not tech but decision-chain length — Sam's benefits from local decision rights and Walmart's fulfillment capability to invest and adapt quickly, whereas Costco's globally standardized, closed-loop system requires HQ approval for major local changes, constraining strategy choices and local execution freedom. Speed vs. rigidity. Sam's also runs a smart rollout cadence — 'warehouses first, stores later'. Traditional retail opens the store, builds local traffic, then considers online. Sam's flips it: deploy instant delivery and cloud nodes first to build awareness and consumption habits online, then use clubs to host higher-end experiences and larger-scale sales. Demand first, capex second. The benefits are clear: cloud nodes test true demand density at low cost, avoiding blind store openings and shortening club ramp-up — the user base is pre-conditioned by instant delivery. It derisks expansion. In essence, Sam's rewired retail from 'supply first, demand later' to 'demand penetration first, heavy asset later' — probe with light nodes, then scale with big-box. Win rates rise accordingly. Similar to how Pop Mart pilots robot stores before opening full-size locations. **** Dolphin Research on Walmart, related reads: ['Walmart: What Powers the Trillion-Dollar Retail Myth?'](https://longbridge.cn/en/topics/40062831?channel=SH000001&invite-code=032064&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN&share_track_id=6db1e30a-09ea-43f6-8111-7930064a18d1) [**'Walmart: Veteran's Surprise Strike in E-com — Why the Re-rating?'**](https://longbridge.cn/en/topics/41591313?channel=SH000001&invite-code=UIFH4YD0&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN&share_track_id=78c20d90-2f54-48c5-9c7f-98ffa76bb6b9) Risk disclosure and statement: [Dolphin Research Disclaimer and General Disclosure](https://support.longbridge.global/topics/misc/dolphin-disclaimer) ### Related Stocks - [WMT.US](https://longbridge.com/en/quote/WMT.US.md) - [COST.US](https://longbridge.com/en/quote/COST.US.md) - [BJ.US](https://longbridge.com/en/quote/BJ.US.md) ## Comments (3) - **晃荡中 · 2026-06-09T12:50:26.000Z**: @Dolphin Research I'll still come back often to read your articles in the future. I've learned a lot from your articles, you're doing a great job! I'm leaving this message to say goodbye for now! Thank you! Thanks! - **逃之遥遥** (2026-06-09T14:23:45.000Z): Fellow townsfolk, don't leave - **新用户_mwITNm · 2026-06-09T11:17:05.000Z**: It's double, or one more time.