Uncover the Surprising Membership Overlap of Walmart, Amazon, and Costco! Find out Which One Reigns Supreme According to Morgan Stanley!

Discovering the Retail Landscape: Walmart+, Amazon Prime, and Costco Battle for Membership Supremacy

In the ever-evolving world of membership-based retailers, three major players, Walmart+, Amazon Prime, and Costco, have been engaging in a fierce competition for consumer loyalty and patronage. Let’s delve into the latest insights provided by Morgan Stanley analysts regarding the competitive landscape among these retail giants.

1. Walmart+ Continues to Gain Ground:
   • Walmart+ has been making significant strides in expanding its membership base, with a notable increase in numbers following strategic initiatives like the Black Friday promotion, offering a 50% discount on memberships.
   • Recent data from a Consumer Pulse survey indicates that Walmart+ boasts nearly 23.8 million members as of September 2024. Adjusting for statistical variability, this figure translates to approximately 15.5 million, signifying an 18.5% household penetration rate.
2. Growth Trajectory:
   • Despite trailing behind Amazon Prime’s 94 million U.S. household memberships and Costco’s estimated 55 million members across the U.S. and Canada, Walmart+ has been outpacing its competitors in terms of growth.
   • With a compound annual growth rate (CAGR) of around 30% from 2020 to 2024, Walmart+ demonstrates a faster expansion compared to Amazon Prime and Costco, which recorded respective CAGRs of approximately 3.5% and 7% during the same period.
3. Membership Overlap:
   • A significant overlap exists among the memberships of Amazon Prime, Walmart+, and Costco, with Amazon Prime and Walmart+ exhibiting the highest intersection.
   • Approximately 86% of Walmart+ members are also Amazon Prime subscribers, while 34% hold Costco memberships. Similarly, 22% of Amazon Prime members also have Walmart+ memberships.
4. Strategic Moves by Walmart:
   • Walmart’s promotional strategies, including the discounted membership offer, are positioned to drive sales and expand its market penetration beyond grocery essentials into discretionary spending.
   • By leveraging its investments in supply chain infrastructure, Walmart Fulfillment Services (WFS), and an expanding marketplace, the retailer aims to solidify its presence in the competitive retail landscape.
5. Untapped Potential and Consumer Behavior:
   • Approximately 25% of U.S. households hold both Amazon Prime and Costco memberships but have yet to embrace Walmart+. This presents a significant opportunity for Walmart to attract new members and tap into a broader consumer base.
   • As consumer preferences evolve and households increasingly subscribe to multiple services, retailers are adapting by offering unique value propositions and enticing promotions to capture discretionary spending.

In conclusion, Walmart’s strategic positioning through competitive pricing, promotional offers, and investments in key areas is setting the stage for stronger competition in non-grocery segments. By appealing to middle-to-upper income consumers seeking value, Walmart is poised to establish itself as a compelling alternative in the membership-based retail arena.