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Costco woes open path for Sam’s

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BENTONVILLE, Ark. — Costco Wholesale Corp.’s loss has been Sam’s Club’s gain.

With Costco customers frustrated by problems with the Washington-based chain’s new Visa card, Sam’s accepted Costco membership cards through July 4.

Sam’s action came after many Costco customers never received the Visa card from Citigroup Inc. that was supposed to replace their American Express card. Others had difficult activating the new card. Hundreds of complaints were posted on Costco’s Facebook page.

“Due to high levels of interest in the Costco Anywhere card and high volumes of calls from cardholders, callers to Citi should expect longer-than-desired hold times,” Costco said on the Facebook page. “Citi is reviewing processes and pulling in additional resources to alleviate hold times.”

Costco opted last year to terminate its 16-year relationship with American Express Co. after the firms couldn’t agree on fees. Costco’s sales have slowed in recent months, disappointing analysts. One reason could be resentment over the credit card switch, analysts said.

A Citigroup spokeswoman said last month the company had issued 11 million of the cards and received 1.5 million customer calls. Call volumes were starting to return to normal, she said.

Costco chief financial officer Richard Galanti said wait times had dropped from an average of 30 to 40 minutes to less than 10 minutes after Citi increased the number of customer-service representatives taking calls to more than 2,000.

Galanti said in late June that two-thirds of the cards had been activated and the company was addressing any remaining problems, including those with 180,000 customers who never got a card because it was mailed to the wrong address.

According to Bloomberg, Galanti said, “We don’t take it lightly, but we are trying to convey to people that this was well planned out. It is not without its issues, but we are addressing them and working hard to do that.”

One analyst said the situation could be kept under control, noting that most of the more than two dozen Costco stores his company called said they were having only isolated issues with the cards. And the chain set up booths in stores to give temporary cards to shoppers who hadn’t received one.

In its competition with Costco, Sam’s now offers in-store pickup for online orders and self-checkout. But it has trailed Costco for nearly 10 years. Since 2007, Sam’s has just once posted higher annual same-store sales growth than its rival. Sam’s had sales of $58 billion last year from its 47 million members at more than 650 stores. Costco garnered $114 billion from 81 million members at nearly 700 stores.

Sam’s president and chief executive officer Rosalind Brewer says that Sam’s has realized it can cater to more affluent customers.

She said this year, “I’m confident we’re taking the business in the right direction … Through a disciplined, refined approach to growth, we will deliver for our members a seamless shopping experience across app, site and club.”


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