The Seattle Times reports this morning on a new survey from Morgan Stanley suggesting that while Amazon and Costco are both Seattle-based companies that "fight for the hearts and minds of a similar set of well-heeled customers willing to pay an annual fee" for either access to products to expedited shipping, it seems entirely likely that they can co-exist relatively peacefully.
"Based on a survey of some 2,700 people," the story says, "investment bank Morgan Stanley said in a report Wednesday that 'Costco and Amazon can coexist.' In fact, 45 percent of Costco members had a Prime membership, showing a high degree of overlap. 'Members of both Costco and Prime have not and generally do not intend to spend more with one retailer/e-tailer at the expense of the other,' the report says.
Two other notes from the Times story...
First, Costco's position seems to be that its advantage is "quality and quantity at the lowest possible price," in the words of CFO Richard Galanti.
Second, the story quotes a recent Cowen & Co estimate that there are 49 million Amazon prime members in the US (a figure Amazon does not confirm), a number that has doubled in just the last three years ... while the warehouse club business has been stagnant in terms of membership size.
“Our key take-away from the survey is both Costco and Amazon have very loyal customer bases, and this loyalty should serve as protective moats around their businesses,” the Morgan Stanley analysts say.
"Based on a survey of some 2,700 people," the story says, "investment bank Morgan Stanley said in a report Wednesday that 'Costco and Amazon can coexist.' In fact, 45 percent of Costco members had a Prime membership, showing a high degree of overlap. 'Members of both Costco and Prime have not and generally do not intend to spend more with one retailer/e-tailer at the expense of the other,' the report says.
Two other notes from the Times story...
First, Costco's position seems to be that its advantage is "quality and quantity at the lowest possible price," in the words of CFO Richard Galanti.
Second, the story quotes a recent Cowen & Co estimate that there are 49 million Amazon prime members in the US (a figure Amazon does not confirm), a number that has doubled in just the last three years ... while the warehouse club business has been stagnant in terms of membership size.
“Our key take-away from the survey is both Costco and Amazon have very loyal customer bases, and this loyalty should serve as protective moats around their businesses,” the Morgan Stanley analysts say.
- KC's View:
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I'm always a little surprised by these sorts of studies, since they seem to come from a place where traditional bricks-and-mortar stores cannot co-exist with Amazon. We can joke about Amazon seeking world domination, but I don't think the company has any illusions about its ability to put everybody else out of business with its online capabilities. If they did, they wouldn't be be interested in building actual stores.
However...
I saw a story on the Twice site the other day that took note of the fact that there seems be be a slowdown in the number of people signing up for Amazon Prime ... which is attributed to the fact that "Amazon is starting to reach a limit of available U.S. households." If accurate, this means that Amazon won't be seeing the same sorts of revenue increases from additional Prime membership fees, which means that it likely will be looking for additional revenue elsewhere. The number cited always has been that Prime members spend upwards of $1200 a year on Amazon, while non-Prime customers spend $500 a year. They'll probably want to get that Prime annual sales number up to $1500 or $2000 or more.
