Recent insights by Morgan Stanley into the competitive arena of top subscription-based retailers, such as Walmart+, Amazon Prime, and Costco (NASDAQ:), reveal some interesting trends. Walmart+ is making significant progress, with its subscriber base reaching near-historic highs, thanks to strategic maneuvers like its Black Friday half-price membership deal.
According to the analysis, as of September 2024, Walmart+ boasted roughly 23.8 million members. Factoring in response variability, this tally is closer to 15.5 million, equating to a household penetration rate of 18.5%.
While this is less than Amazon.com Inc (NASDAQ:) Prime’s impressive 94 million U.S. households and Costco’s estimated 55 million members across the U.S. and Canada, Walmart+ is leading in terms of growth, witnessing an annual growth rate (CAGR) of about 30% from 2020 to 2024.
In comparison, during the same period, Amazon Prime and Costco recorded CAGRs of around 3.5% and 7% respectively.
Interestingly, there’s significant membership overlap, with Amazon Prime and Walmart+ showing the most intersection. Nearly 86% of Walmart+ subscribers also have an Amazon Prime subscription, while 34% have Costco memberships.
Of the Amazon Prime subscribers, 22% also have Walmart+ subscriptions.
“The vast intersection of Amazon Prime subscribers within the Walmart+ subscriber base can be attributed to Amazon’s extensive membership base, but it also indicates that Walmart+ is giving significant competition in Amazon’s key market,” explained the team of analysts led by Simeon Gutman.
They also emphasize that Walmart’s promotional tactics, such as discounted memberships, could help it increase its market share beyond groceries and into discretionary spending.
This is in line with Walmart’s significant investments in logistics infrastructure, Walmart (NYSE:) Fulfillment Services (WFS), and its burgeoning marketplace.
“Offering discounted memberships during peak shopping seasons should not only stimulate sales but also offset the fixed costs of these investments and the influx of new sellers,” the report suggests.
Additionally, the report underscores potential untapped growth, pointing out that approximately 25% of U.S. households have both Amazon Prime and Costco subscriptions but haven’t yet adopted Walmart+.
Morgan Stanley also reflects on the broader implications for consumer spending habits. As households increasingly subscribe to multiple services, retailers are constantly seeking innovative ways to stand out and capture discretionary income.
Walmart’s effort to widen its subscriber base through competitive pricing and strategic promotions could position it as a strong competitor in non-grocery segments, appealing to middle-to-upper income consumers seeking value.
