queen of the supermarket (7.12.24)

If there’s power in numbers, it seems there’s might in membership.

Membership-based warehouse clubs like Costco, BJ’s and Walmart’s Sam’s Club are experiencing significant growth among Gen Z and Millennials. Walmart CFO John David Rainey shared that over the last two fiscal years, Gen Z membership grew by 63% and Millennial membership by 14%. As a result, Gen Z and Millennials now constitute a quarter of Sam’s Club members.

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What's driving younger generations to sign up for memberships at retailers like Sam’s Club, leading to Sam’s Club's 11 consecutive quarters of double-digit comparable sales growth?

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Warehouse-style stores that sell items in bulk and require membership are gaining popularity among younger generations seeking ways to navigate higher price points and save money through savvy shopping. According to the U.S. Department of Agriculture, consumers spent an average of 11.2% of their disposable income on food in 2023. The persistent effects of inflation are impacting consumers’ budgets and prompting many to seek cost-saving strategies. Anecdotally, companies and research firms observe that younger consumers are leveraging bulk buying to save costs, often sharing purchases with friends, roommates, or family members, as well as supporting the in-store brands that have grown their own cult-like followings. Although retailers may not have designed memberships and benefits for this purpose, consumers find that buying larger quantities and dividing them yields lower per-unit prices than purchasing smaller sizes at traditional stores. Potentially in response, Costco announced it was increasing its membership fees this week for the first time since 2017.

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This bulk-buying mentality isn’t new; it’s a creative iteration of the essential ‘adulting’ skillset that young people often develop to balance budgets and manage expenses. This includes money-saving practices like joining loyalty programs, using coupons, comparing prices across stores and brands, and choosing generic over branded products. Each requires varying levels of dedication, discipline, and commitment to financial efficiency.

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For marketers, this trend underscores that while behaviors may evolve as shopping platforms, brands, and methods advance both online and offline, fundamental human insights remain consistent. Understanding and embracing consumer behaviors—from the rational (like budget constraints and physical needs) to the more subtle and emotional—is crucial. Consumers may rationalize their purchases based on practical needs (like running out of essentials or finding a good deal), but underlying subconscious factors (like emotions, hunger, or moods) often play pivotal roles.

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These seemingly minor details can significantly influence consumer decisions. Brands are increasingly leveraging such insights through their respective retail media networks. Sam’s Club Member Access Platform launched in 2022, which now includes full-funnel capabilities, including video and CTV opportunities beyond onsite media. Last month, Costco?also announced its intentions to develop a media network leveraging its data, joining other powerful RMNs such as Amazon Ads, Walmart Connect, and Roundel (Target) Media. RMNs are capturing an increasing share, with eMarketer?estimating that spending will reach approximately 20% by EOY. This growth is undoubtedly driven by closed-loop sales attribution and the valuable granular audience and product insights that these networks provide to brands.

Brands are also developing communities such as Sam’s Club Member’s Mark Community, a platform where members engage and provide input on products before they’re stocked, even voting on flavors or testing new items.

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This highlights the importance of understanding consumer quirks. How are you tapping into the unspoken emotional, mental, physical, and financial drivers that influence shopping decisions? By pairing this understanding with surprises, delights, and innovative technologies, brands can better anticipate and meet consumer needs in ways that resonate deeply.