Sam’s Club Offering Free Shipping In Challenge to Costco and Amazon
Hoping to better compete with arch-rival Costco Wholesale (COST) and Amazon.com, Sam’s Club said on Wednesday that it’s now offering free shipping for many items to its premium members as part of a restructuring to its membership programs.
The bulk retailer, a unit of Walmart Inc (WMT), says that the bulk of items it sells online will qualify and that there will be no minimum order size for customers who have a “Plus” membership, which costs $100 annually. Exceptions will include merchandise that is only available for curbside pickup such as fresh and frozen food (groceries account for nearly 60% of company revenue), bulk items, and products sent directly to customers by a third party.
The new membership terms contrast with sister chain Walmart, which offers free two-day shipping on orders of $35 or more with no membership requirement. Meanwhile, Amazon offers free two-shipping to Prime members.
Sam’s Club’s move is aimed at spurring an uptick in memberships (currently about 47 million) at a time such fees represent the bulk of its in operating profits. It’s also a way for the $53 billion a year chain to compete more effectively with Amazon.com’s (AMZN) popular Prime membership, as that retailer offers ever speedier delivery, and Costco’s intense shopper loyalty despite its status as a relative e-commerce laggard.
Another likely goal for Sam’s Club is to increase awareness of its private label Member’s Mark, an umbrella brand for all its own products, from bourbon to toilet paper, that compete with Costco’s wildly successful Kirkland $15 billion-a-year brand.
Though business has improved in recent quarters, Sam’s has long lagged Costco, hampered by weaker locations that are typically closer to a Walmart and in less affluent areas than Costco’s as a result of a strategy Sam’s implemented at launch in the 1980’s. Last month, Sam’s Club abruptly announced it was closing 63 of its clubs, as its warehouse stores are called, or roughly 10% of the overall, transforming some of them into distribution centers to better support e-commerce.
The chain also announced a simplification of its memberships, eliminating the distinction between business and non-business members, and reducing the number of options to two from three. The “Plus” membership, with access to free shipping, is $100 annually whether a person or a company, and “Club” (previously known as Sam’s Savings) will be $45.
A spokeswoman for Sam’s Club told Fortune, “We’ve simply acknowledged that our business members and household members often buy the same items and, for the most part, we don’t need to treat them as two separate groups.” While annual fees remain the same for the primary memberships, the cost of additional memberships will fall slightly.