Warehouse clubs don't play by the same rules as other retailers. Because people pay to join Costco and Walmart's Sam's Clubs, both companies have a different relationship with their members compared to rivals like Target, or regional grocery chains.
In many cases, it's a more transparent relationship because both Costco and Sam's Club have promised the same thing to their members — low prices. Costco (COST) offers extensive detail on its margin choices and markups during its quarterly earnings calls with investors.
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Sam's Club, because it's just a part of the Walmart calls, does not offer the same level of depth but both chains put keeping prices low above all else. That also means that they don't play by the same rules with their websites as Amazon, or even the Walmart.com site where paid members get free shipping.
That's something Costco has never offered, but Sam's Club did. Plus members, the chain's more expensive membership that costs $110 per year, offered free shipping on most items.
"Plus membership provides the best, highest value available. If you run a business, Plus benefits like free shipping, Curbside Pickup and early shopping hours can help take your business to the next level," the retailer shared on its website.
That was part of being a Sam's Club Plus member, but it won't be as of Aug. 19.
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Sam's Club takes away free shipping
Costco, it should be noted, does not have different shipping policies between its two membership levels. Gold members pay $60 a year in order to access the warehouse club's locations while Executive members pay $120 but also get 2% cash back annually on most items up to $1,000 per year.
Basically, Executive members pay extra to get a better price, which is a pretty significant value even if you don't earn the full $1,000 cash back. That likely explains why at the end of the third quarter, Costco had 34.5 million paid Executive members, an increase of 661,000 for the quarter.
"Executive members now represent over 46% of paid members and 73.1% of worldwide sales," CFO Gary Millerchip said during the call.
Sam's Club's Plus membership offers a similar 2% cashback award, but it's key difference was the free shipping offer. That is being replaced by a new shipping pricing scheme.
Under the new system, the warehouse club will charge $8 for orders under $50 for both same-day delivery (on items that qualify) and shipping.
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Costco's shipping prices are more confusing
The warehouse club views its grocery and non-grocery businesses as separate when ordering online. You can order both at the same time, but the carts and their totals are separate.
When ordering grocery items, it pushes customers to place bigger orders, but it's not based on the dollar value of those items.
"When we’re able to ship a full box of items, it allows us to cut down on delivery costs. We’ll return those savings to you by waiving the delivery fee," according to its website.
Non-perishable items are treated differently than perishable ones.
"Our non-perishable pantry items have a $3 per-item delivery fee which is waived when you spend $75 or more, tax not included," the company shared.
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For non-grocery items, it gets even more confusing (although Costco is very transparent on its website and clearly discloses all fees.
"Each product on Costco.com has its own shipping fee attached (although many items are shipped at no additional charge). If there’s a shipping charge, you’ll find it on the product detail page to the right of the product picture," the company shared.
Costco provided further detail as to how its shipping charges for non-grocery items are set:
"Each vendor and manufacturer has its own shipping charge, and it cannot be waived by Costco. There are cases when items may be shipped from different locations (even if the items are identical) depending upon inventory availability. Each item and any associated shipping fees are charged at the time that the item ships — this is why you might see multiple charges on your financial statement," the company explained.
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