Morgan Stanley breaks down the overlap between Walmart, Amazon, Costco memberships

Investing.com — In a recent note to clients, Morgan Stanley analysts delved into the competitive landscape among leading membership-based retailers, focusing on Walmart+, Amazon Prime, and Costco (NASDAQ:).

According to the report, Walmart+ continues to make strides with a membership base nearing record levels, bolstered by strategic initiatives like its 50% discount on memberships for Black Friday.

Citing its Consumer Pulse survey, Morgan Stanley notes that Walmart+ saw approximately 23.8 million members as of September 2024. Adjusting for response variability, this figure aligns closer to 15.5 million, representing an 18.5% household penetration.

While this is below Amazon.com Inc (NASDAQ:) Prime’s dominant 94 million U.S. households and Costco’s estimated 55 million members across the U.S. and Canada, Walmart+ is outpacing its peers in growth, with a compound annual growth rate (CAGR) of roughly 30% from 2020 to 2024.

By comparison, Amazon Prime and Costco showed respective CAGRs of approximately 3.5% and 7% during the same period.

Membership overlap remains significant, with Amazon Prime and Walmart+ showing the highest intersection. About 86% of Walmart+ members are also subscribed to Amazon Prime, while 34% hold Costco memberships.

Among Amazon Prime members, 22% also have Walmart+ memberships.

“The high overlap of Amazon Prime members within the cohort of Walmart+ members is primarily due to Amazon’s large membership base, but it also demonstrates that Walmart+ continues to compete heavily within Amazon’s core market,” analysts led by Simeon Gutman explained.

They also point out that Walmart’s promotional strategies, such as the half-price membership offer, are poised to enhance its market share beyond grocery staples into discretionary spending.

The retailer’s efforts align with its significant investments in supply chain infrastructure, Walmart (NYSE:) Fulfillment Services (WFS), and its expanding marketplace.

“Providing discounted memberships at a key shopping occasion of the year should not only drive sales but help leverage the fixed costs of these investments and all of the new
sellers,” the report states.

Furthermore, the note highlights potential untapped growth, noting that approximately 25% of U.S. households hold both Amazon Prime and Costco memberships but have yet to adopt Walmart+.

Morgan Stanley also reflects on the broader implications for consumer spending habits. As households increasingly subscribe to multiple services, retailers are finding new ways to differentiate themselves and capture discretionary income.

Walmart’s push to expand its membership base through competitive pricing and strategic promotions could position it as a stronger competitor in non-grocery segments, appealing to middle-to-upper income consumers seeking value.