Introduction
When it comes to household names in the retail world, Walmart and Costco are two that immediately come to mind. With their massive warehouses, bulk products, and promise of deep discounts, the two chains have a lot in common at a glance. This leaves many shoppers wondering: is Costco actually owned by Walmart?
As a retail industry expert and self-proclaimed "picky shopper," I‘m here to settle this question once and for all. Despite their apparent similarities, Costco and Walmart are in fact bitter rivals, locked in a battle for the hearts, minds, and wallets of bargain-hunting shoppers across the nation. In this in-depth analysis, we‘ll examine the key differences between the two retail giants, the secrets behind their success, and what the future might hold in this ongoing retail war.
Costco and Walmart: Two Retail Titans
First, let‘s clarify the burning question at hand: no, Costco is not owned by Walmart. While Walmart does operate its own warehouse club division called Sam‘s Club, Costco Wholesale is an entirely separate company with its own leadership, business model, and corporate structure.
Costco is a publicly traded company with a current market cap of over $160 billion. It‘s run by CEO Craig Jelinek and a board of directors, with a broad base of institutional and individual shareholders. Walmart, on the other hand, is a family-owned business, with the Walton family still controlling over 50% of company shares.[^1] [^1]: Source: "Walmart: Who Owns the Largest U.S. Employer?" Forbes, 2020.
While both companies are behemoths in the retail space, they‘ve taken somewhat different paths to get there. Walmart began as a single discount store in 1962, expanding rapidly through the 1980s and 1990s by offering "everyday low prices" and dominating rural and suburban markets. Costco, founded in 1983, focused instead on serving small businesses and affluent urbanites, using a membership model to offer bulk goods at near-wholesale prices.[^2] [^2]: Source: "Walmart vs. Costco: What‘s the Difference?" Investopedia, 2021.
Today, Walmart is the undisputed king of retail, with over 11,500 stores worldwide and annual revenue of $559 billion. Costco, while smaller, is no slouch either, with 804 warehouses globally and $166 billion in revenue. The two companies combined account for a staggering 25% of the U.S. grocery market.[^3] [^3]: Source: "Walmart and Costco Dominate the Retail Landscape" Fortune, 2020.
Inside the Costco Model
So how has Costco managed to thrive in Walmart‘s shadow? The key lies in Costco‘s unique business model, which prioritizes volume over variety, and customer loyalty over all else.
Unlike Walmart, which stocks a dizzying array of products across dozens of departments, Costco takes a curated approach, offering a limited selection of only about 4,000 SKUs per warehouse (compared to 142,000 at Walmart). By focusing on a smaller number of high-quality goods, Costco is able to negotiate rock-bottom prices with suppliers and pass the savings on to customers.[^4] [^4]: Source: "7 Reasons Costco is So Addictive," Kiplinger, 2017.
Costco‘s other secret weapon is its membership model. By charging a $60 annual fee ($120 for "executive" members), Costco creates a powerful incentive for customer loyalty and repeat visits. Costco‘s membership renewal rate is an astounding 90% in North America, and membership fees account for the majority of the company‘s operating profits.[^5] [^5]: Source: "How Costco Convinces Shoppers to Pay $60 to Buy Its Goods," Insider, 2021.
This membership model also allows Costco to offer unbeatable prices, with many goods sold essentially at cost. When you factor in the "treasure hunt" shopping experience, generous free sample policy, and beloved food court (which famously hasn‘t raised the price of its hot dog and soda combo since 1985), it‘s no wonder that Costco inspires an almost cult-like devotion among its members.
Walmart Fights Back
Of course, Walmart is no slouch when it comes to customer loyalty and low prices. With its vast network of stores, efficient supply chain, and relentless focus on cost-cutting, Walmart is able to undercut competitors on price and offer unbeatable convenience.
In recent years, Walmart has also made aggressive moves to compete with Costco and Amazon in the e-commerce space. In 2016, Walmart acquired Jet.com for $3.3 billion to bolster its online presence, and has since rolled out free two-day shipping, curbside pickup, and even a direct competitor to Amazon Prime called Walmart+.[^6] [^6]: Source: "Walmart+ vs. Amazon Prime: Which Is Better?" Tom‘s Guide, 2021.
Still, Costco has managed to hold its own against Walmart‘s onslaught. In fact, by some measures, Costco is actually outperforming its larger rival. Consider these stats:
- Costco‘s sales per square foot ($1,200) are nearly double Walmart‘s ($600)[^7]
- Costco‘s average employee wage ($24/hour) is significantly higher than Walmart‘s ($14.76/hour)[^8]
- Costco scores higher than Walmart on customer satisfaction surveys and employee retention[^9]
[^8]: Source: "Walmart and Costco Wage War for Best Pay," American Banker, 2021.
[^9]: Source: "Costco and Walmart Compete for Customer Loyalty," Harvard Business Review, 2021.
The Future of Retail
As the retail industry continues to evolve, both Walmart and Costco will need to stay nimble to fend off threats from Amazon and other e-commerce upstarts. Costco has been beefing up its online presence and same-day delivery options through partnerships with Instacart and Shipt, while Walmart has invested heavily in its curbside pickup and subscription delivery services.
One area where Costco may have an edge is in its international expansion. While Walmart has hit some speed bumps in overseas markets like Germany and Japan, Costco has seen strong growth in Canada, Mexico, Japan, South Korea, and Taiwan. In China, Costco‘s first store opening in 2019 drew such massive crowds that the store had to close early on opening day.[^10] [^10]: Source: "Costco‘s First China Store Was So Popular it Closed Early on Opening Day," Business Insider, 2019.
Still, Walmart remains a formidable competitor with deep pockets and a willingness to adapt. In a 2020 interview, Walmart CEO Doug McMillon acknowledged the threat posed by Costco and outlined his strategy to compete: "We need to narrow our price gaps, and we need to broaden our assortment…We‘re focused on building a strong omni-channel business and an ecosystem that includes new revenue streams."[^11] [^11]: Source: "How Walmart Plans to Take On Costco," Retail Dive, 2020.
At the end of the day, the Walmart vs. Costco rivalry is a fascinating case study in the rapidly changing world of retail. While the two companies may have different approaches and target audiences, they share a relentless focus on delivering value to the customer. As a savvy shopper and student of the industry, I‘ll be watching closely to see how this battle plays out in the years to come. One thing‘s for sure: with these two heavyweights slugging it out, it‘s a great time to be a bargain-hunting consumer.
