Amazon's Prime membership is eating into Costco and Sam's Club's territory

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Amazon's paid membership program Prime is rapidly growing its footprint — and it could be doing so at the expense of traditional warehouse club brands like Costco and Sam's Club.

According to a note published by Cowen & Co. on Monday, the percentage of US households that only pay for Prime membership has more than doubled over the past four years, from 7.1% in 2013 to 16.2% in 2016. In the same time span, housholds that only use either Costco (from 14.9% to 9.8%) and Sam's Club (from 16.9% to 9.7%) dropped noticeably.

In the meantime, households that pay for both Prime and Costco memberships jumped from 4.8% to 11.3% in the past four years, while the same trend is seen among households subscribing to both Prime and Sam's Club (from 4.8% to 8.5% in 2016).

12 things you should buy at Costco
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12 things you should buy at Costco
Consumer Reports claims Costco's house brand, Kirkland bacon, actually tastes better than any name-brand bacon testers reviewed. It’s also much more inexpensive, costing between $10 and $16 for a 4-pound pack — about $1.50 less a pound than the leading name-brand bacon options.
The Krazy Coupon Lady — experts on Costco deals — reports Costco’s pure maple syrup costs half of what you would pay at Amazon. House brand Kirkland’s maple syrup costs just $0.32 an ounce, compared to $0.67 at Trader Joe’s or nearly $0.56 for Walmart’s non-organic option. 

A number of experts, including My Frugal Adventures and Consumer Reports, say Costco is the best place to stock up on such things as extra virgin olive oil and coconut oil.

"In blind taste tests, we found the Kirkland Signature Real Mayonnaise to be just as good as Hellmann’s, for about 60 percent of the cost," writes Consumer Reports.

Kirkland detergents are proven to be just as effective as name-brand detergents that cost two or three times more, according to Consumer Reports tests. Kirkland’s Signature Free & Clear liquid detergent is just $0.11 a load, and nearly as successful in cleaning stains as Tide Plus Ultra Stain Release, which costs more than twice as much.

At Costco, Kirkland’s canola oil cooking spray is just under $0.15 an ounce. That’s almost half of Walmart’s $0.27, and way less than a four-pack of Pam, which sells for about $0.46 an ounce on Amazon, reports the Krazy Coupon Lady.

Costco’s bulk batteries are a famously good deal — especially since this is a category where buying in bulk makes sense, as batteries are unlikely to expire.

You can buy 3 pounds of Costco spinach for the price of a pound at Walmart, reports the Krazy Coupon Lady. At Costco, it costs just $0.25 an ounce for Earthbound Farm’s organic baby spinach.
While Kirkland brands are reportedly pretty tasty, you can also save big by buying name-brand booze at Costco. Plus, thanks to local liquor laws, in much of the US you can buy alcohol from Costco with no membership card.
The Kirkland vanilla ice cream won Consumer Reports testers over with its "big dairy flavor and complex vanilla-extract flavor." Plus, it’s just $0.30 a serving, compared to top-rated Ben & Jerry’s, which costs a dollar a serving.

At Costco, vanilla extract costs just $0.62 an ounce, reports the Krazy Coupon Lady. At Walmart, it’s $1.84. Plus, it’s not imitation vanilla — it’s the real deal.

According to Consumer Reports, Costco sells the most inexpensive pharmacy prescription drugs, with other pharmacies charging up to 447% more for the same drugs.

Even better, you don’t need to be a Costco member to use the pharmacy.

While you can buy plenty of items in bulk, some of Costco’s best deals are in the food court.

One of the best deals, a hot dog and drink, costs just $1.50. According to Business Insider taste testers, the hot dog is "very flavorful," with "a slight smokiness … similar to kielbasa."


Cowen said the numbers indicate either Amazon Prime attracting a higher percentage of Costco and Sam's Club members, or signing up new customers who didn't have any warehouse membership before. And as Amazon continues to add more perks for its Prime members, the trend will likely continue, it said.

"The risk is that as Amazon continues to improve Prime's value proposition and add more layers to the Prime service, US households could cancel subscriptions for one or both of the Warehouse clubs. At a minimum, the number of consumers opting to just use Costco and/or Sam's Club 'Only' is likely to continue to decline," Cowen wrote in the note.

Screen Shot 2016 09 26 at 10.54.34 AMCheriss May/NurPhoto via Getty Images

Prime is Amazon's paid membership program that gives access to free shipping and its own video and music streaming services. Amazon has never publicly disclosed the number of Prime members, but analysts believe it's the roughly in the range of 50 million to 70 million in the US.

Cowen pegs Prime's total membership at 49 million in the US, or 44% of all US households. That's at an all-time high, and nearly triple the penetration rate in 2012 — all the while Costco and Sam's Club's penetration rates have remained largely flat over the past four years.

Screen Shot 2016 09 26 at 11.50.41 AMCheriss May/NurPhoto via Getty Images

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