Recent analysis by Morgan Stanley delves into the competitive landscape of leading membership-based retailers, focusing on Walmart+, Amazon Prime, and Costco.
Walmart+ has been making significant progress, with a membership base approaching record levels, driven by strategic initiatives like offering a 50% discount on memberships for Black Friday.
Based on a Consumer Pulse survey, Morgan Stanley reports that Walmart+ had about 23.8 million members as of September 2024. Adjusting for response variability, the figure is closer to 15.5 million, representing an 18.5% household penetration rate.
Although Walmart+ lags behind Amazon Prime’s 94 million U.S. households and Costco’s estimated 55 million members in the U.S. and Canada, it is leading in growth, with a compound annual growth rate (CAGR) of around 30% from 2020 to 2024. In comparison, Amazon Prime and Costco had CAGRs of approximately 3.5% and 7% during the same period.
There is significant overlap in membership, with Amazon Prime and Walmart+ having the highest intersection. Around 86% of Walmart+ members also subscribe to Amazon Prime, while 34% have Costco memberships. Among Amazon Prime members, 22% also have Walmart+ memberships.
Analysts led by Simeon Gutman point out that the high overlap between Amazon Prime and Walmart+ memberships is due to Amazon’s large membership base and Walmart’s strong competition in Amazon’s core market.
By offering discounted memberships and strategic promotions, Walmart aims to enhance its market share beyond groceries and into discretionary spending. The retailer’s investments in supply chain infrastructure, Walmart Fulfillment Services (WFS), and expanding marketplace support this strategy.
There is untapped growth potential, as around 25% of U.S. households have both Amazon Prime and Costco memberships but have not yet adopted Walmart+. This presents an opportunity for Walmart to attract more customers.
As households subscribe to multiple services, retailers are finding ways to differentiate themselves and capture discretionary income. Walmart’s focus on expanding its membership base through competitive pricing and promotions could make it a stronger competitor in non-grocery segments, appealing to middle-to-upper income consumers seeking value.