Sam's Club and Costco operate nearly identical businesses: Both are membership-based warehouse clubs, and to shop at either chain you need to pay an annual fee.
When you join you get access to no-frills warehouses filled with well-curated selections of low-cost merchandise. Both chains work with vendors to negotiate the best possible prices.
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Part of that business model involves keeping the overall selection small, and items are often sold in bulk. These aren't supermarkets: You will find all the staples but you also might find only one option for a particular item. And if you want ketchup or Cheerios, you might have to buy in a larger quantity than you're used to.
In addition, the term warehouse isn't a euphemism. Both Costco and Walmart-owned (WMT) Sam's Club treat their stores like actual warehouses. Merchandise is often stacked on pallets and there's little effort to make things pretty.
Basically, both chains have committed to spending as little as possible on anything other than keeping prices low. The model has worked spectacularly, as both warehouse clubs have steadily grown while doing a good job of retaining members.
Both Costco (COST) and Sam's Club, however, do have a practice that members don't like, and Sam's Club might have found a way to eliminate it.
Image source: John Moore/Getty Images
Costco and Sam's Club do something members don't like
When you check out at Sam's Club and Costco. both companies have someone who checks your purchases against your receipt. In many cases that process offends members since they just checked out with a person at a register. Neither warehouse club relies on self-checkout.
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Members don't like the implication that they might be stealing, and some simply don't appreciate the added time it takes for someone to check their receipt.
That's a practice Sam's Club has been developing technology to eliminate.
The company has been testing artificial-intelligence solutions to eliminate the need to check receipts as customers leave. Walmart Chief Executive Doug McMillon talked about the tech during the chain's annual Investors' Day on June 5.
"As it relates to being tech-powered ... we're investing in technology, including AI and computer vision, to help enable Sam's Club members to skip a receipt check as they exit," McMillon said.
Sam's Club explains its AI exit technology
Sam's Club actually unveiled its evolving exit technology at CES back in January in Las Vegas. The company said it was looking for "new ways to alleviate member pain points and provide the most convenient shopping experience."
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At the consumer electronics showcase the retailer showed off a new AI- and computer-vision-enabled experience that "revolutionizes the exit process by eliminating the need for manual receipt checks," the company said on its website. "This new technology aims to reduce wait times and congestion at the exit. And we’re already seeing results, with all members leaving the club 23% faster."
The company said the technology was solving a complicated problem.
"It’s one thing to enable this kind of tech in a small footprint, and for a handful of items — a small snack, a book, or maybe something as big as a box of cereal," it said. "But at Sam’s Club, we’re doing it at scale. For our members, the experience is seamless; they simply walk through the two exit archways."
The entire process takes only a few seconds.
"To reach the highest levels of accuracy, we continuously train our computer-vision models using millions of images of Sam’s Club items in various positions and lighting. This enables our systems to recognize items regardless of how they are positioned in carts," Sam's Club added.
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