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The Honolulu Advertiser

Posted on: Sunday, October 31, 2004

Costco, Sam's Club test Hawai'i's allegiances

 •  Comparing Costco, Sam's Club

By Andrew Gomes
Advertiser Staff Writer

Alfredo Costello can't get enough of the $5.50-a-pound fish poke at Sam's Club. Phyllis Guard is passionate about Costco oatmeal cookies. Terri Hironaka is torn between local eggs at Costco and Cheesecake Factory cheesecake at Sam's.

Analysts say Costco's Iwilei location will feel the effects after the opening of Hawai'i's second Sam's Club store on Ke'eaumoku Street. But competition is nothing new to these two wholesale giants. Costco estimates that 75 percent of its stores nationwide compete to some extent with its larger rival.

Advertiser library photo • June 12, 2002

Around O'ahu, residents are rethinking allegiances to Hawai'i's two membership warehouse clubs after Sam's last week opened a store near Ala Moana Center less than three miles from Costco's newest Hawai'i store in Iwilei.

The move sets up the industry's two biggest rivals for close combat in Honolulu's urban core where most O'ahu residents live or work, creating more choice for consumers wanting to save money by buying in bulk.

Local retail consultant Stephany Sofos said she believes the new Sam's will also compete heavily with traditional supermarkets in the area, but that Costco definitely will feel the effect.

"You have that captive market in metro Honolulu," she said. "It will pull from Costco."

Battling for club members is not unique to Hawai'i, as Sam's and Costco expand into increasingly shared territory nationwide.

Costco, which is in 37 states compared with 50 for Sam's, estimates that about 75 percent of its 443 stores compete to some extent with its larger 543-store rival.

In the past couple of years, both chains have made focused efforts to ratchet up the competition.

Sam's went after more small-business owners, opening early for business members and pledging to have lower prices on 1,500 business supply items.

Costco cut some of its prices and hired more employees to speed checkout lines.

Sam's hired a "wine master" and brought in more upscale items.

Costco accelerated expansion plans. So did Sam's.

Today, analysts say Costco is generally perceived as having more fresh foods, more upscale items. They say Costco also does a better job of selling impulse merchandise like books, CDs and trampolines.

Sam's has tried to position itself as the warehouse focused on serving small-business owners, though analysts said Costco still has more business members, who tend to shop more frequently and spend more than non-business members.

In Hawai'i, Costco is familiar to more residents because of its historically dominant position. The chain, based in Issaquah, Wash., established a Salt Lake store in 1988, then expanded to Hawai'i Kai in 1992 and to Waipi'o in 2000.

Two years ago, Costco replaced the Salt Lake store with one in Iwilei. Costco also has one store each on Maui and the Big Island.

Sam's started locally with a Pearl Highlands store in 1993. But the chain, owned by Arkansas-based Wal-Mart Stores Inc., held back on expansion during the mid-'90s and maintained just one Hawai'i store until last week.

Neither company discloses Hawai'i membership figures or sales, but Sam's mounted a massive drive to build membership for its store at the Ke'eaumoku superblock, offering free passes and canvassing the neighboring business community.

Tracy Quine, a longtime Costco member who lives in Nu'uanu, said she was curious enough about what Sam's offered that she toured the new store on Thursday. "I'm on a fact-finding mission," she said before disappearing into the warehouse.

The distinctions between Costco and Sam's as perceived by Hawai'i shoppers can vary.

Moanalua resident Alvin Calvan, who has memberships to both clubs but shops more at Costco, said Costco has greater variety, and Sam's has a bigger selection of smaller-portion items.

"If you're not looking for bulk, Sam's portions are smaller," he said.

Hironaka, who is fond of Cheesecake Factory cheesecake at Sam's and local eggs at Costco, said she thinks the frozen foods at Sam's are cheaper, but come in smaller packages.

A mother of three young boys, Hironaka also prefers Costco's in-house brand of sports drinks, though she thinks the new Ke'eaumoku Sam's has a wider variety.

Guard, who raves about Costco's oatmeal cookies plus its garlic bread and steaks, said her friends who are Sam's members tell her Sam's has overall better variety. So Guard bought a Sam's membership recently to do product and price comparisons.

On a recent survey through the polished cement aisles at the Iwilei Costco and Ke'eaumoku Sam's, a sampling of comparable items were generally a few cents to a few dollars less at Sam's, though many products varied slightly by brand or size.

For instance, a case of Aloha Maid juice was $6.19 at Costco and $6.15 at Sam's. A package of 3,200 wooden chopsticks was $3.39 at Costco and $3.32 at Sam's. A loaf of Ani's sweetbread was $2.59 at Costco and $2.53 at Sam's.

Higher-priced items included a 20-inch freestyle bicycle for $113 at Costco and $102 at Sam's. A 1-cubic-foot Sharp microwave was $64.99 at Costco and $64.84 at Sam's.

Differences also varied by product. Costco had more large appliances. Sam's had bed mattresses. Sam's had more sports equipment. Costco had high-end food blenders and small wine refrigerators. Sam's stocks fresh whole fish and twice as much poke. Costco has a hearing aid center and pharmacy. Costco sells gasoline. Sam's does not sell beer, wine or liquor, but expects to receive a license to do so in the next month.

Much was similar. Both stores feature product demonstrations and food samples. Both bring in special product "road shows." Both sell merchandise under their own private label (Kirkland for Costco, Member's Mark for Sam's). Both sell a hot dog or sausage dog with a drink for $1.50 and a $6,000 50-inch Sony flat-screen TV.

Most of the variances were subtle. Morey Boogie's North Shore model bodyboard was $39 at Sam's vs. Morey's $40 Mach Gripper model at Costco. A 50-pound container of chlorine tablets was $73 at Sam's vs. a 40-pound container of chlorine tablets with algaecide for $57 at Costco.

"They get about the same stuffs," said Costello, an independent restaurant repairman who buys goods for his business and home about twice a week from Sam's and Costco. "Maybe it's a few dollars cheaper at one store for some items, but not for others."

Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.

• • •

TALE OF THE TAPE
Iwilei Costco

• Opened: June 2002

• Size: 151,000 square feet

• Annual membership fee: $45 for business and individual members; $100 for premium membership

• Hours: Mon.-Fri. 11 a.m. to 8:30 p.m. Sat.-Sun. 9 a.m. to 6 p.m. Opens at 7 a.m. for special business members.

• Payment options: cash, check, debit, American Express, Costco credit card.

Ke'eaumoku Sam's

• Opened: October 2004

• Size: 155,000 square feet

• Annual membership fee: $30 for business members; $35 for non-business members; $100 for premium membership

• Hours: Mon.-Fri. 10 .a.m to 8:30 p.m. Sat.-Sun. 10 a.m. to 6 p.m. Opens at 7 a.m. for business members.

• Payment options: cash, check, debit, Discover Card, Sam's credit or Wal-Mart credit.



COST DIFFERENCES ARE MINIMAL ON MOST ITEMS
Costco Sam's
Hot dog and drink $1.50 $1.50
Loaf of Ani's sweetbread $2.59 $2.53
Pack of 3,200 wooden chopsticks $3.39 $3.32
Case of Aloha Maid juice $6.19 $6.15
1-cubic-foot Sharp microwave $64.99 $64.84
Morey Boogie bodyboard $40 $39
20-inch freestyle bicycle $113 $102
50-inch Sony flat-screen TV $6,000 $6,000