AmEx’s Deal With Sam’s Club Will Only Partially Fill the Costco Hole

American Express Co. soon will be accepted at Sam’s Club, the membership-club division of Wal-Mart Stores Inc. The new deal will open more than 650 warehouse stores with thousands of big-spending customers to AmEx, but it still will fall short of filling the big hole that the warehouse-club sector’s biggest retailer, Costco Wholesale Corp., will leave next spring when it ends AmEx card acceptance and its AmEx cobranded card.

Nevertheless, AmEx was jubilant Thursday when it announced the deal, which takes effect Oct. 1. Warehouse-club retailers are picky about which cards they’ll accept to keep prices low, and AmEx usually is the costliest of the major card brands for merchants. “We want merchant partners that feel good about the relationship with American Express and warmly welcome our cardmembers, and Sam’s Club is prepared to do that,” Anré Williams, president of AmEx’s Global Merchant Services unit, tells Digital Transactions News.

In contrast to its expiring deal with Costco, the new pact with Sam’s Club is non-exclusive and doesn’t involve a cobranded card. Sam’s has accepted American Express on its Web site for some time, along with Visa, MasterCard, and Discover cards. The new deal brings point-of-sale acceptance of AmEx cards to 653 stores in the U.S. and Puerto Rico. In its stores, Sam’s already accepts its private-label credit card, its cobranded MasterCard issued by Synchrony Bank, other MasterCard cards, and Discover.

A Sam’s Club spokesperson did not respond to a Digital Transactions News request for comment. But in a press release, Tracey Brown, chief member officer at Sam’s Club, said, “Everything we do ties back to how we can better serve our members. The acceptance of the American Express card underscores our commitment to bring greater ease and flexibility to our members’ shopping experience. American Express—known for their exceptional customer service, loyal, higher-spending cardmembers, and advocacy of small businesses—will help to extend the value of membership.”

AmEx, a big provider of cards to small businesses, said Sam’s Club serves 500,000 small-business owners every day. In addition, the typical AmEx cardholder spends three to four times that of the average Visa/MasterCard holder, according to Williams. “It [the new agreement] is going to generate a significant amount of transactions and spending on our network, and it will generate additional [sales] for Sam’s Club,” he says. “We believe there will be an increase in the number of cardmembers using their cards, and the average ticket will go up.”

AmEx would not disclose the discount rate Sam’s Club will pay on its card transactions. Williams says to stay tuned for a possible promotion trumpeting the new acceptance deal, but he wouldn’t give details.

With $58 billion in sales in its last fiscal year, Sam’s Club as a standalone entity is the nation’s eighth-largest retailer, according to AmEx. (Its parent company Wal-Mart is No. 1). Issaquah, Wash.-based Costco, which has 480 locations in the U.S. and Puerto Rico, is No. 3, according to the National Retail Federation, and recently reported net sales of $113.7 billion for the fiscal year ended Aug. 31.

While it’s good news for AmEx, the Sam’s Club deal won’t have the same punch as AmEx’s 16-year arrangement with Costco, which made AmEx the only general-purpose credit card brand Costco accepted and included a cobranded card that generated $82 billion in charge volume last year, some 8% of AmEx’s worldwide card-billed business. Next April, a Citibank-Visa cobranded card will replace the AmEx cobrand, and Visa will become the only major card brand the retailer will accept in its U.S. stores.