Dive Brief:
- Fifty-seven percent of Costco members also pay for Amazon Prime, according to a survey of 2,500 consumers last month by research firm MoffettNathanson. That’s up from just 13% who reported they paid for both memberships in 2013.
- Amazon still is the leader in volume in terms of memberships, with 80 million people in the U.S. and Canada paying for Prime in 2017. Costco reported having 62 million cardholders.
- MoffettNathanson also found that more current Costco and Amazon Prime members intend to renew their memberships than did in 2016.
Dive Insight:
Consumers say they have Amazon Prime and Costco memberships because they each offer a distinct value. Amazon Prime is ideal for ordering staples, or binging new episodes of trending TV shows and movies. Costco is a go-to not only for filling up the tank, but also for wandering the aisles in "treasure hunt" mode.
Both stores offer far more than these services, but consumers appear to have a checklist of what they like to buy from each retailer. In turn, these shoppers see the value of spending a collective $159 a year to access these offers.
Costco is able to do what many competing stores wish they could do, and that is to offer a retail experience that Amazon can't match. The warehouse store gives consumers aisles upon aisles of goods at low prices, many of which they forget they need until they see them. As brilliant as Amazon is at showcasing their seemingly limitless goods, it can’t make a 30-piece set of glass Tupperware look as appealing on-screen as Costco can in-store.
Research also shows Costco is beating Amazon on pricing — sometimes by huge margins. LendEDU, an online student loan refinancing marketplace, found that Amazon prices on average were 56.48% more expensive than the same products found at a Costco store shopped by company researchers.
While Costco is not a strong competitor with Amazon online, it has made some changes that have resulted in significant growth in this sector. E-commerce sales increased more than 42% in the last quarter, according to its most recent earnings report. This came about after improving the company website, launching a two-day delivery service for orders over $75, and expanding it’s relationship with Instacart.
Walmart-owned Sam’s Club is also upping it’s online game to compete with both Amazon and Costco. Last week, Sam’s Club announced no-minimum free shipping for all Sam's plus members on 95% of items. The new program aims to deliver products to the majority of customers within one or two days, just like Prime. This expansion on delivery comes on the heels of news that 63 Sam’s Club stores will close, and as many as 12 will be converted into e-commerce fulfillment centers.
Other retailers may feel encouraged to see Costco’s success as proof that bricks and mortars can beat Amazon — but it’s not that simple. Costco offers a unique shopping experience that's been honed over many years, and sharpened by a seasoned management team. At best, retailers can take away the knowledge that to best the country's largest online retailer, you have to offer something unique.