The wholesale club industry stands as one of retail's most fascinating success stories. Despite economic fluctuations and retail disruption, Costco, Sam's Club, and BJ's Wholesale Club continue to thrive through their unique business models and evolving strategies.
Michael Clayman, publisher of Warehouse Club Focus, who has spent nearly three decades analyzing and documenting the wholesale club industry, reveals the four pillars that have sustained wholesale clubs: consistently low prices that justify membership fees, superior product quality, membership revenue that flows directly to the bottom line, and the "treasure hunt" merchandising strategy that keeps members coming back regularly. These elements existed before COVID-19, but the pandemic accelerated growth as clubs remained open during lockdowns and became trusted resources for essential items.
Each operator has carved out a distinctive competitive position. BJ's operates at higher margins (16.5%) compared to Costco and Sam's Club (both around 11%), positioning itself between traditional warehouse clubs and grocery stores. This allows BJ's to remain price-competitive on branded items while generating higher margins elsewhere, particularly through private label products. Sam's Club differentiates through technology and convenience with Scan & Go shopping, pizza delivery, curbside pickup, and home delivery handled by their own employees rather than third parties. Meanwhile, Costco maintains unwavering margin discipline, proving that low prices drive massive sales volume – their average annual sales per location have doubled over 15 years to approximately $260 million.
The analysis also explores how all three chains have decreased their focus on business members over time, finding consumer items generate higher sales volumes. We examine PriceSmart's successful international expansion across Central America, Latin America, and the Caribbean, achieving remarkable productivity despite smaller store footprints by following the same low-price, high-quality formula.
For suppliers aiming to succeed in this channel, Clayman offers crucial advice: visit the clubs frequently to observe merchandising innovations across all departments and never underestimate their relentless focus on maintaining low prices, which remains the foundation of their business model regardless of other strategic initiatives.
