Is Amazon Prime membership still a better deal than Costco?
Costco’s first-quarter earnings beat most analyst expectations late Thursday, helped by strong membership of its loyalty club. But how does its value compare to Amazon Prime?
Amazon Prime memberships typically run $ 99 a year (though it recently became cheaper for some consumers). Comparatively, the cost of a membership to Costco is now $ 60 a year (and $ 120 a year for an executive membership.) And studies have shown that Costco’s online prices are better than Amazon’s — though Amazon is still competitive when it comes to products like books and CDs.
The debate between Costco and Amazon is in many ways defined by cultural and generational differences. People who subscribe to Amazon Prime tend to be more tech-savvy and younger, while seniors are more likely to be a Costco.
Some consumers choose to double-dip, but being a member of both should come down to a person’s habits — if they don’t use either membership enough there’s a risk of it becoming a budget-buster. Rachael Blum, a 27-year-old aerospace engineer from West Palm Beach, Fla., recently chose to cancel her Costco COST, -0.93% membership.
An Amazon AMZN, +0.87% Prime member for about five years, she found herself rarely going to Costco and instead using the free shipping and subscription services to stock up on household necessities, making her membership to the warehouse club somewhat of a waste. “I’d rather pay a little more for paper towels right to my door than have to deal with the Costco parking lot,” Blum said.
The debate between Costco and Amazon is in many ways defined by cultural and generational differences. People who have both memberships earn roughly 20% more than people with just one or the other and nearly 73% more than people who are not members of either program, according to a recent study published in the Journal of Shopper Research.
Preferences for one over the other also vary with age. “People who subscribe to Amazon Prime were more tech-savvy and tend to be a bit younger, while seniors were more likely to be a Costco,” said Steve Koppitsch, a marketing professor at Bowling Green State University and a co-author of the study.
But is a Costco membership worth its value — especially if the cost of owning one is going up? And can Amazon Prime really replace the theoretical savings offered by the wholesale club?
MarketWatch breaks down the need-to-know information about the two membership programs:
Costco: Costco members have access to discounts on a wide range of items and services, from travel and insurance to prescription medications and gasoline. Additionally, Costco members can receive technical support on electronics purchased at the store. Executive members receive an annual 2% reward (up to $ 750) on most merchandise purchased at Costco
Amazon: Arguably the most popular perk of Amazon Prime is the free two-day shipping on most items, and two-hour delivery of some items through Prime Now. It also includes video and music streaming, photo storage, and access to the Kindle Owner’s Lending Library and certain Audible channels. Parents who are Prime members can join Amazon Family for free and receive 20% off necessities such as diapers.
Both stores encourage impulse buying. The layout of Costco’s stores is designed to tempt customers into buying items not on their shopping list, and Amazon’s one-click purchasing option makes it easier to spend money.
Costco: Memberships are generally required, but non-members can shop at Costco using Costco Cash gift cards. People without a membership can purchase prescription medications at Costco and shop on the retailer’s website. Non-members can also visit Costco locations for eye exams and hearing screenings, but cannot buy glasses, contacts or hearing aids in the store. In terms of credit cards, Costco only accept Visa or its own store-brand cards.
Amazon: No membership is required to shop on Amazon or to enroll in the online retailer’s Subscribe and Save program. Certain Amazon services, such as Prime Video, are only available through a membership.
Costco: Costco famously has a very lenient return policy on many items, and often will accept returns even without a receipt or the original packaging for a full refund. Electronics must be returned within 90 days, and diamonds must be returned with original paperwork.
Amazon: Most new, unopened items can be returned within 30 days of delivery to receive a full refund (that window is longer during the holiday season). Amazon also offers replacements and exchanges.
The best of Amazon
What Amazon may lack in savings, though, it makes up for in convenience and added perks. By and large, the biggest perk with Amazon Prime is its two-day free shipping on millions of products — and same-day shipping is even available on some items in certain markets.
Making use of the added services that come with a Prime membership can make it cost-effective, James said. “If you won’t use these Prime perks, and don’t necessarily need two-day shipping on everything, just shop without Prime and still get free shipping when you spend at least $ 25,” he added.
Amazon’s popular Subscribe & Save program doesn’t require shoppers to be Prime members, and offers savings in excess of those consumers can get from a warehouse club like Costco. “For large families or those expecting children, you can save 20% on diaper subscriptions through Amazon’s Subscribe & Save,” said Jon Lal, founder and CEO of BeFrugal. “It takes a lot of the guesswork out of shopping for the items you use all the time.”
The best of Costco
Though not true for all products, Costco is most commonly known for providing savings on a wide variety of items and for its Kirkland Signature in-house line. But for many families, shopping at Costco is an experience in itself. The wholesale club is known for providing tasting samples around the store, and its food courts (replete with foot-long hot dogs and pizza) have amassed something of a cult following. And there’s something to be said for shopping in person, rather than online, and being able to compare products on the spot physically.
The drawbacks of both memberships
Shopping at either Costco or Amazon is not without its pitfalls, though. For starters, both Amazon and Costco rely on customers to do lots of impulse-buying. The layout of Costco’s stores is designed to tempt customers into buying items not on their shopping list, and Amazon’s one-click purchasing option makes it easier to spend money.
Many current and former Costco shoppers gripe about many things, from the long lines to the lack of shopping bags. As for Amazon, free two-day shipping doesn’t apply to every product, even for Prime members.
“Costco shoppers know how difficult it is to leave the store without at least one impulse buy, thanks to free samples and the popular food court,” Perez said. “The ease and speed with which items arrive through Amazon Prime makes it hard for members to avoid impulse buys as well.”
Bulk shopping at Costco can be a waste of money if someone can’t consume everything they bought before it expires when it comes to perishable items. Plus, many current and former Costco shoppers gripe about many things, from the long lines to the lack of shopping bags. As for Amazon, free two-day shipping doesn’t apply to every product, even for Prime members.
Ultimately, choosing one over the other will come down to a person’s needs and preferences. If saving money is important, Costco may be a better bet, but with convenient shipping and the added perks Amazon Prime may fit a consumer’s lifestyle better. “You can order stuff from Costco online, but you’ll pay for shipping,” said Jeanine Skowronski, a credit expert with Credit.com. “On the flip side, you can’t really fill up your gas tank through Amazon.”
(This story has been updated.)