Sam’s Club to vie with Costco

The country’s two largest warehouse shopping clubs will go head-to-head in Spokane Valley.

Sam’s West Inc., a real estate division of Wal-Mart Stores, Inc., recently paid about $7.6 million to purchase land from Union Pacific Railroad Co., according to First American Title Co. The 20-plus acres are next door to the Costco Wholesale store on East Sprague Avenue.

Jennifer Holder, a spokeswoman for Wal-Mart, confirmed that the company plans to build a Sam’s Club in the Spokane Valley location, but said the land needs a zoning change before the company can apply for a building permit.

The purchase puts Costco, which Fortune Magazine recently dubbed the fourth-largest retailer in the United States, up against a division of the world’s largest retailer in two Spokane-area locations. Wal-Mart announced earlier this year that it’s building a 153,000-square-foot Sam’s Club on 21.5 acres on the northeast corner of Nevada Street and Lincoln Road, not far from the Division Street Costco.

While the two membership clubs are increasingly offering a similar mix of discount housewares, clothing, groceries and other goods, experts say Costco bucks the Wall-Street trend of increasing profits at the expense of employee wages. A recent Harvard Business Review article, which cities a variety of sources, said Costco employees average $17 an hour, while employees of Wal-Mart Stores Inc. earn an estimated average of $9.86 to $11.52 hourly. Costco employees pay 8 percent of their health-care premiums, while Wal-Mart workers pay 33 percent of theirs.

The story also pointed out that Costco has significantly lower turnover — 17 percent versus 44 percent at Sam’s Club, and Costco generated higher sales with 38 percent fewer employees.

Although Holder has yet to be updated on specific plans for the store size and number of people it will employ, she said once a building permit is issued, Sam’s Clubs typically take nine to 11 months to build and another two to three months to staff and stock with goods.

Although Costco Wholesale Corp. operates fewer stores than Sam’s Club — 504 compared with 550 — the Issaquah, Wash.-based Costco has fiscal 2006 sales that were about $20 billion higher, according to Hoover’s, a company that researches corporations. Costco’s sales were $60.2 billion, while Sam’s Club’s were $39.8 billion.

When it comes to membership, the two are neck-and-neck. Sam’s claims membership of 46 million, while Costco has 47 million members, Hoover’s said.

Costco tends to serve a higher-income demographic, according to Fortune Magazine, with one-third of the retailer’s members having household incomes of $75,000 a year or more. ABC News has said Costco is the largest seller of fine wine in the world.

But, over the past few years, Sam’s Club has greatly expanded its merchandise mix to include more upper-end goods, such as flat-screen televisions, diamond jewelry and organic foods.

Holder said bringing Sam’s Club into the Spokane market is less about competing with Costco than moving forward with the company’s expansion plans and serving customers.