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 progress with a membership base approaching record levels, supported by strategic initiatives such as the 50% discount on memberships for Black Friday.
Citing the Consumer Pulse survey, Morgan Stanley notes that Walmart+ had approximately 23.8 million members as of September 2024. Adjusted for the variability of responses, this figure is closer to 15.5 million, which equates to a household penetration of 18.5%.
While this is below Amazon.com Inc (NASDAQ:) Prime’s dominant 94 million US households and Costco’s estimated 55 million members in the US and Canada, Walmart+ is outpacing its peers in terms of growth, with a compound annual growth rate (CAGR) of approximately 30 million. % from 2020 to 2024.
In comparison, Amazon Prime and Costco showed CAGRs of about 3.5% and 7%, respectively, over the same period.
The overlap between memberships remains significant, with Amazon Prime and Walmart+ showing the highest intersection. About 86% of Walmart+ members also subscribe to Amazon Prime, while 34% have a Costco membership.
Of Amazon Prime members, 22% also have a Walmart+ membership.
“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,” explained analysts led by Simeon Gutman out.
They also point out that Walmart’s promotional strategies, such as its half-price membership offer, are poised to expand its market share beyond groceries and into discretionary spending.
The retailer’s efforts are in line with its significant investments in supply chain infrastructure, Walmart (NYSE:) Fulfillment Services (WFS) and its growing market.
“Offering discounted memberships at a key shopping time of the year should not only boost sales but also help leverage the fixed costs of these investments and any new benefits.
sellers,” the report said.
Additionally, the note highlights the potential untapped growth, noting that about 25% of U.S. households have both Amazon Prime and Costco memberships but have yet to adopt Walmart+.
Morgan Stanley is also considering the broader implications for consumer spending habits. As households increasingly subscribe to multiple services, retailers are finding new ways to differentiate themselves and generate discretionary revenue.
Walmart’s push to expand its membership base through competitive pricing and strategic promotions could position the company as a stronger competitor in non-grocery segments, which would appeal to middle-to-upper income consumers looking for value.
