Investing.com – In a recent note to clients, Morgan Stanley analysts delved into the competitive landscape among major membership retailers, focusing on Walmart+, Amazon Prime and Costco (NASDAQ:).
According to the report, Walmart+ continues to move forward with a membership base approaching record levels, bolstered by strategic initiatives such as its 50% discount on memberships for Black Friday.
Citing its Consumer Pulse survey, Morgan Stanley notes that Walmart+ had approximately 23.8 million members as of September 2024. Adjusting for variability in responses, this figure aligns closer to 15.5 million, which represents a penetration of 18.5% households.
While this is below Amazon.com Inc’s (NASDAQ:) Prime’s 94 million US households and Costco’s estimated 55 million members in the US and Canada, Walmart+ is outpacing its peers in growth, with a compound annual growth rate (CAGR) of approximately 30% from 2020 to 2024.
In comparison, Amazon Prime and Costco showed CAGRs of approximately 3.5% and 7% over the same period.
Membership overlap remains significant, with Amazon Prime and Walmart+ showing the highest intersection. About 86% of Walmart+ members are also subscribers to Amazon Prime, while 34% are Costco members.
Among Amazon Prime members, 22% also have Walmart+ memberships.
“The large overlap of Amazon Prime members within the Walmart+ member cohort is primarily due to Amazon’s large member base, but also demonstrates that Walmart+ continues to compete strongly within Amazon’s core marketplace,” explained the analysts led by Simeon Gutman.
They also note that Walmart’s promotional strategies, such as the half-price membership offer, are poised to improve its market share beyond staple groceries and 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.
“Offering discounted memberships at a key shopping occasion of the year should not only boost sales but also help leverage the fixed costs of these investments and all the new ones.”
sellers,” the report states.
Additionally, the note highlights untapped potential growth, noting that approximately 25% of American households have Amazon Prime and Costco memberships, but have not yet adopted 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 revenue.
Walmart’s push to expand its member base through competitive pricing and strategic promotions could position it as a stronger competitor in non-food segments, attracting middle- to upper-income consumers looking for value.