The news: Warehouse clubs offer compelling value thanks to their bulk offerings and lower-priced gas, but a new YouGov survey suggests they have opportunities to gain more members and encourage more frequent visits by making the shopping more convenient and improving product availability and selection.
That’s particularly important for Walmart-owned Sam’s Club. We expect its household membership growth to slow to just 1.5% this year, marking the fourth consecutive year of deceleration. Costco and BJ’s Wholesale Club, by comparison, are expected to grow 4.5% and 6.3%, respectively.
Walmart appears to be looking for ways to reverse that trend. It recently began offering customers a $120 bundle of Walmart+ and Sam’s Club Plus memberships, nearly $100 less than the cost of buying the subscriptions separately. The deal could help attract new Sam’s Club members by strengthening the combined value proposition.
The challenges: The survey highlights several sources of friction in the warehouse club experience, from crowded stores and inconvenient locations to long checkout lines. Retailers are responding with a range of initiatives.
Costco has room to remove friction. Its customers report more frustration with crowds (38%), parking (16%), and inconvenient locations (13%) than shoppers at competing clubs. The retailer is working to address some of those pain points by expanding its footprint. It opened 28 warehouses this year, three of which were relocations, and plans to open another 33 next year, including five relocations. Some of those openings will extend its reach in more mature US markets. Costco is also making it easier to shop without visiting a warehouse. It has expanded its delivery partnership with Uber and launched on DoorDash Marketplace, giving shoppers more ways to buy its products.
Sam’s Club focuses on saving shoppers time. For the 10% of customers who say they don't have time to shop in-store, it has enhanced its Express delivery service to offer delivery in as little as an hour. The retailer reported in August that ecommerce sales grew 26%, with delivery from its clubs up “triple digits” following the launch of 1-hour delivery. Sam’s Club is also addressing checkout frustrations, which 13% of customers cite as an issue, through Scan & Go. The technology lets shoppers scan items in the app and skip checkout lines altogether. Adoption is approaching 40%, based on comments in recent earnings calls.
BJ’s is betting on convenience. The retailer’s plans to open 25 to 30 new clubs every two years aims to help address the 10% of customers who find its locations inconvenient. It is also offering more flexibility through curbside and in-club pickup, same-day delivery, and ExpressPay, which lets shoppers scan items in the BJ’s app and bypass checkout lines. BJ’s says members who use its digital conveniences spend more and are more loyal over time.
BJ’s is also using technology to improve customer service, an issue cited by 13% of its customers. Its AI-powered shopping assistant, Bev, has handled more than 100,000 conversations, helping customers find products, check club hours, and make better use of their memberships.
Implications for retailers: The YouGov data suggests addressing frustrations beyond price can keep customers coming back.
Warehouse clubs need to make shopping as convenient and frictionless as possible, particularly as consumers have more options for buying everyday essentials. Streamlining checkout, expanding delivery options, and using technology to improve customer service are relatively easy wins. Others, like limited product selection, are harder to overcome because they are inherent to the warehouse club model. But retailers can help close that gap by expanding their online assortments to give members more ways to shop beyond the warehouse.
While warehouse clubs are well positioned to benefit from consumers’ current focus on value, they can’t take that advantage for granted. Now is the time to invest in the customer experience and give shoppers more reasons to join, return, and spend.
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