Club Growth Brings New Deduction Risks

Club retail is having a moment.

Actually, more than a moment.

The latest grocery news makes it pretty clear that Sam’s Club, Costco, and BJ’s are all benefiting from shoppers looking for value, bulk savings, and more food purchases in club channels. Grocery Dive reported that food sales ticked up across all three chains in their most recent quarters, from perishables to private label dry goods. Sam’s Club saw mid-single-digit comp sales growth in fresh, frozen, refrigerated, beverage, and grocery categories. Costco reported fresh comparable sales in the low double digits and food-and-sundries comps in the mid-single digits. BJ’s said its perishables, grocery, and sundries division grew comparable sales by 2.3%, and private label already represented 27% of merchandise sales in fiscal 2025, with a goal of reaching 30%.

If you sell into clubs, this is exciting.

But it is also a warning.

Growth in club retail brings not only opportunity but also increased risk of penalties for poor execution.

This is where suppliers need to keep both eyes open. Club retailers are attractive because the volume can be meaningful, shoppers are often loyal, and the value story is strong. Grocery Dive noted that Costco has gained grocery share over the past several years, and shoppers increasingly see club stores as a place to trim grocery bills, not just stock up on bottled water and giant cereal boxes.

That shift matters because it raises the stakes for suppliers.

When clubs become more central to everyday shopping, retailers tend to tighten expectations around availability, pack architecture, item data, on-time delivery, quality consistency, promotional support, and overall reliability. The sales upside is real. So is the compliance exposure.

That is the trade-off brands sometimes underestimate.

A lot of suppliers still think of club growth mainly in commercial terms: larger packs, fewer items, bigger orders, nice volume. But operationally, club is unforgiving. If your packaging specs are off, your item setup is incomplete, your case configuration creates friction, your replenishment rhythm is inconsistent, or your documentation does not line up, the back half of that “great win” can get noisy in a hurry.

And noisy, in this business, often means deductions.

Here is a fictional example. Picture a supplier that lands an exciting club placement for a multi-pack snack item. The launch goes well at first. Velocity is strong. Reorders come fast. Then problems start stacking up. A packaging detail creates receiving confusion. A pallet spec is interpreted differently across facilities. One item-data field was never fully aligned. The supplier spends weeks celebrating the volume bump while chargebacks and deductions quietly start collecting in the background. This is a fictional scenario, but it mirrors the way club-channel complexity can surprise teams that were focused mostly on winning the business.

That is why club growth should never be treated as “just more sales.”

There are more rules.

And the current news suggests there will be a lot more of that to manage. Grocery Dive reported that Walmart plans to double Sam’s Club membership and more than double its sales and profit in less than 10 years. The company is also building toward roughly 15 new clubs each year while remodeling 600 existing locations. BJ’s is continuing its expansion pace after opening 14 clubs in fiscal 2025, the most in a single year, and Costco expects 28 net new openings globally in fiscal 2026, with 30-plus per year going forward.

In plain English: the club channel is not standing still.

It is scaling.

And when a channel scales, the cost of small supplier mistakes usually scales with it.

There is another layer here, too. Private label is becoming even more important in clubs. Grocery Dive reported that Costco added around 30 new Kirkland Signature items in the second quarter, while BJ’s is explicitly trying to increase private label penetration. Sam’s Club has said Member’s Mark accounted for 50% of merchandise sales growth over the last two years.

That should get every national brand’s attention.

When private label grows inside a high-volume, value-focused channel, branded suppliers often face even tighter expectations. Retailers want great economics, excellent execution, clean data, and fewer headaches. If two suppliers can deliver similar value, the one that creates less friction tends to look a lot better.

That is not personal. It is operational.

The core takeaway for suppliers is direct: securing club business is just the start. To ensure real financial success, suppliers must actively protect their profitability after the initial sale.

That means watching for compliance deductions, receiving disputes, item-data issues, pack problems, promotional mismatches, and post-audit leakage. It means not assuming that strong sell-through automatically equals strong profitability. Sometimes the item is moving beautifully while the margin story is quietly falling apart in another department.

That is why HRG’s perspective is so practical here. Growth is good. Club growth can be very good. But if a supplier is not actively monitoring deductions and recoverable claims, some of the most exciting sales wins can turn into disappointing financial results.

The club channel is hot.

That makes discipline even hotter.

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