Walmart vs Costco in 2023: An In-Depth Comparison for Shoppers
As a retail industry expert, I‘m often asked – should I shop at Walmart or Costco for the best prices, selection and overall experience? This comprehensive 2800+ word guide will compare every aspect of Walmart and Costco in 2023 and beyond to help you decide which retailer is better suited for your household shopping needs.
A Brief Background on the Retail Giants
Founded in 1962 by Sam Walton in Arkansas, Walmart has grown over the past 60 years to become the world‘s largest company by revenue. It generated over $570 billion in sales for fiscal year 2022 across its 11,000+ stores and clubs in 27 countries. From humble small-town roots, Walmart now sets the standard for scale and logistics innovation in retail.
Costco was founded in 1976 as the Price Club warehouse model pioneered by Sol and Robert Price. It merged with competitor Costco in 1993 and rebranded under the Costco Wholesale name. With over 800 warehouse stores globally and $222 billion in annual sales, Costco is the 3rd largest retailer in the world. It continues to disrupt the industry with its membership-based warehouse model offering steep discounts on bulk-sized name brands.
While Walmart‘s empire was built on everyday low prices and vast selection, Costco thrives on offering extreme value to its loyal member base. Let‘s examine how the retail titans compare across key categories in 2023.
Store Setup: Warehouses vs. Traditional Stores
The most noticeable difference when walking into a Walmart vs. Costco is the store layout and feel.
Walmart stores are designed for convenient browsing across departments. The average Supercenter is a massive 179,000 square feet with wide aisles and eye-level shelving. Separate sections house groceries, clothing, home goods, electronics, automotive, garden and more. Ceilings feel lower with prominently placed signage.
Costco pioneered the membership warehouse model, with average locations spanning 140,000 square feet. Merchandise is stacked high on pallets, with minimal signage giving an industrial feel. Open layouts allow shoppers to quickly fill oversized carts with bulk purchases. Volume is prioritized over variety in Costco‘s limited SKU approach.
While Walmart is open for all to peruse like a traditional retail store, a Costco membership ($60/$120 annually) is required for entry. This funded customer base allows Costco to operate on razor-thin margins, a key part of its value formula.
Product Assortment: Wide vs. Narrow and Deep
The merchandise selection reflects the differing approaches. A typical Walmart Supercenter stocks over 120,000 unique products across every category imaginable. Costco warehouses only carry around 4,000 SKUs, though stocked heavily in bulk volumes.
Walmart is designed for one-stop shopping with endless variety. name brand CPG items compete intensely for shelf space with Walmart‘s myriad of private label brands. Walmart wants customers visiting frequently and filling large baskets across categories.
Costco prioritizes volume discounts on name brand staples and luxury items. Shoppers spend over $600 per visit on average. Costco is happy with members visiting monthly to stock up on essentials. Exclusive brands like Kirkland focus on value more than competing with national labels.
Key Product Categories
Both stores contain the following core departments:
- Groceries
- Fresh Produce
- Meat & Deli
- Bakery
- Frozen Foods
- Alcohol
- Household Essentials
- Cleaning Supplies
- OTC Pharmacy
- Health & Beauty Aids
- Pet Food & Supplies
- Home Furnishings
- Appliances
- Clothing
- Jewelry
- Sporting Goods
- Automotive
- Garden Center
- Electronics
- Toys & Seasonal
- Office Supplies
Key Differentiators
Some categories have more differentiation:
- Walmart devotes more space to apparel, home decor, fabrics, crafting.
- Costco allocates more space for major appliances, tires, and select luxury categories.
Walmart also prepares more ready-to-eat meals and baked goods in-store. Costco has a wildly popular food court with $1.50 hot dog combo being a cult favorite.
Private / Exclusive Brands
Walmart drives massive sales through its army of private label brands:
- Sam‘s Choice – Premium food and beverages
- Great Value – Value-priced grocery staples
- Marketside – Fresh prepared meals
- Equate – Pharmacy, personal care
- Parent‘s Choice – Infant products and toys
- George – Value apparel and home fashions
Kirkland Signature is Costco‘s primary private label covering food, wine, spirits, clothing, home goods, batteries, and even golf balls. Quality and value trump individual branding.
Pricing and Memberships
The Costco membership fee buys access to steep discounts, especially for bulk items. Walmart delivers low everyday prices for individual shoppers.
On a basket of staple groceries, Costco was generally a few dollars cheaper overall thanks to extreme bulk savings on items like cheese and olive oil. Units may cost 2-3x as much at Walmart, but the basket size is smaller.
A 2005 study found Costco‘s prices were on average 17% cheaper than Walmart. But packaging differences must be accounted for.
Costco wins on unit price, but customers must buy more. Great for large families or food service businesses.
Walmart enables smaller households to pay a bit more per ounce to buy only what they need.
In-Store Services
Both retailers operate large pharmacies, vision centers, photo printing, and auto care centers. Costco outsources additional services:
- Walmart has auto repair shops and garages at select Supercenters
- Costco partners with companies to offer home services, insurance, mortgages, vacation packages.
Walmart is expanding healthcare services after success with low-cost dental clinics. Telehealth partnerships are pending.
Costco offers steep discounts on home improvement project contractors like flooring installation or solar panel setup through their Member Service program.
Walmart has more in-store services like salons, propane tank exchange, and video game trials through their Playbox kiosks.
Specialty Store Formats
Beyond massive supercenters, both retailers continue innovating with smaller specialty store formats:
Walmart operates 700 Neighborhood Market grocery stores averaging 40k square feet. Their Walmart Health clinics average 8-10k square feet.
Costco has over 100 Business Center locations focused on bulk business orders and expanded food service offerings. New Costco Next flagship locations with unique services are coming soon.
These smaller formats enable expansion into higher-density urban areas and complement the flagship supersized locations.
Ecommerce and Digital Innovation
Initially slow to online retail, both companies now see robust ecommerce growth:
Walmart ecommerce sales grew 12% in 2021 to reach $73 billion, spurred by expanded online grocery. They operate over 3,500 grocery pickup locations.
Costco saw 25% online sales growth in 2021, reaching $11.3 billion. Low-contact pickup orders tripled since 2019.
Walmart has rapidly expanded delivery capabilities through acquisitions and partnerships. Costco piloted same-day grocery delivery in 2021.
Walmart+ and Instacart are key online grocery providers. Costco offers members-only two-day grocery delivery via Instacart.
Both retailers are ramping up digital communication channels with shoppers, including mobile apps with wallet/membership cards.
Customer Service and Experience
In customer satisfaction surveys, Costco consistently outperforms Walmart and most retailers. Costco ranked #1 with an ACSI score of 83/100 versus Walmart at 74/100.
Costco staff earn above-average retail wages and report higher job satisfaction. Friendly service and demo stations enhance the treasure hunt shopping environment.
Critics contend Walmart underinvests in labor and employee experience, resulting in lackluster customer service ratings. Efforts are underway to improve training and boost wages.
Return Policy
Costco wins hands down with one of the most generous return policies in retail that builds member loyalty. You can return most items at any time, even without a receipt, for a full refund. Exceptions are electronics, jewelry, alcohol, and a few other categories.
Walmart has a 90-day return window with receipt, or options for store credit without a receipt. Higher-priced electronics have a 15-day return window.
Employee Compensation and Benefits
Costco pays hourly workers an average of $24/hour, over double the retail industry norm. Cashiers can earn over $50k/year. Entry-level hourly pay recently increased to $16/hour.
Walmart has raised its average hourly wage to $15/hour for half of associates after facing pressure to improve. But starting wages remain at $11/hour.
While wages are higher, Costco offers minimal employee benefits and health insurance. Walmart provides benefits for all full-time and most part-time associates.
Annual turnover rates average 24% at Costco vs. over 50% at Walmart, pointing to greater job satisfaction.
Financial Performance
Walmart revenue in FY 2022: $573 billion
- Market cap: $406 billion
- POS share of US grocery: ~20%
Costco revenue in FY 2022: $222 billion
- Market cap: $248 billion
- POS share of US grocery: ~2%
While smaller in total sales, Costco is incredibly productive on a per location basis:
- Average sales per warehouse: $175 million
- Average sales per square foot: Over $1,500
- Gross margins: 13%
- Net margins: 2-3%
Walmart margins are thinner given everyday low pricing:
- Gross margins: 24%
- Net margins: 3-4%
Both retailers generate strong sales, cash flow and shareholder value, Costco with membership fees and Walmart with massive scale.
Stock Performance
As market leaders, both companies are solid long-term stocks for investors. Shares of Walmart and Costco have each provided over 20% annualized total returns over the past 15 years.
However, Walmart may be positioned better for long-term growth. Avoiding a membership model provides more stability than Costco‘s renewal fees. Acquiring higher-margin digital brands and expanding healthcare services should also boost Walmart‘s value.
That said, Costco has extremely loyal members and room for many more warehouse locations globally. While Walmart strives to avoid Amazon‘s dominance, Costco fulfills a unique bulk value niche.
Key Takeaways: Who Does It Better?
After reviewing all aspects of these retail heavyweights, here are some key takeaways on who may be better suited for your household:
For big families or those who value bulk value buys, Costco is tough to beat.
For convenience and grab-and-go shopping, Walmart wins with wider selections.
For a premium pantry with gourmet ingredients or luxury home goods, Costco excels.
For price-sensitive shoppers on a strict budget, Walmart stretches dollars further.
For those wanting tech and delivery innovation, Walmart leads in digital commerce and omnichannel services.
There‘s room for both retailers in most households. I suggest a Costco membership for access to unbeatable bulk pricing on essentials to stock up smartly combined with Walmart‘s everyday low prices on other items. That‘s the ultimate combination for savings.
Bottom line – it pays to be a savvy omni-shopper and take advantage of the best each has to offer. Let me know if you have any other questions!