Warehouse Clubs and Discount Department Stores Battle for Market Share

Walmart might as well be the first chain mentioned in this category. Since its founding in 1962, Walmart has flourished to become the world’s top retailer by far. How does the Walmart method work? Primarily, it meets the simple needs of average consumers by using money-back guarantees, everyday low prices, merchandise that is rarely out of stock, ease of access and floor help trained to offer assistance. Interestingly, Walmart was first conceptualized as a rural store—a modern general store if you will—located in smaller communities that lacked much in the way of local shopping facilities. However, once it had conquered hundreds of small towns, Walmart branched out into major metro areas with astonishing success, and eventually took that winning formula into foreign markets. What Walmart, Costco and other discount stores lack in profit margin, they gain exponentially in volume.

With the addition of substantial grocery departments, discount stores are taking customers, and therefore profits, from traditional department, grocery and specialty stores—today more than ever before. (Walmart’s stores generate more than one-half of total revenues through their grocery departments.) In general, discount stores are able to provide the convenience that mall-based department stores lack, while offering everyday low prices. Walmart and its competitors have plenty of parking by the door, fast centralized checkout, easy returns and quality inventory that includes broad categories of name-brand merchandise as well as value-priced store brands of high quality.

Another interesting point is that discount stores attract a broad customer demographic. People of all ages and incomes are shopping there. It’s become commonplace to see luxury vehicles in Walmart, Target and Kohl’s parking lots alongside practical compact cars and light trucks. Convenience, value and practicality are key motivators for shoppers. Discount stores are superbly positioned to fill these needs.

Warehouse clubs especially saw skyrocketing business during the Coronavirus pandemic. Shoppers consolidated buying trips to avoid catching the virus, making the variety of goods available at warehouse clubs all the more attractive. Walmart’s Sam’s Club chain saw its sales up 11.1% in the third quarter of 2020 over the same quarter in 2019. Ecommerce sales at Sam’s Club were up 41% from 2019. Costco’s October same store sales rose 14.4% in 2020 over the same month in 2019. Ecommerce sales soared by 91%.

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Warehouse Clubs and Discount Department Stores Battle for Market Share, Business and Industry Trends Analysis

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