CompetitorsWide moat

Costco names its competitors in the 10-K without much ceremony: "Walmart, Target, Kroger, and Amazon are among our significant general merchandise retail competitors in the U.S.," alongside "other warehouse clubs, including Walmart's Sam's Club and BJ's Wholesale Club"¹. Almost every one of them is larger, better capitalised or faster growing than Costco in some important respect. None of them competes with it in the way the word usually means.

The reason is the fee. Costco is not trying to win a shopper on a Tuesday; it is trying to be worth $65 a year in advance, and that is a different contest with different rules. A rival can beat Costco's price on any individual item and still lose, because the member has already paid and will not go elsewhere for a saving smaller than the trip. A rival can build better logistics and still lose, because the trip is the product. What a rival cannot do is charge the fee without first accepting years of merchandise margins too thin to survive on — and the field of companies whose shareholders will permit that is essentially empty.

Which is why the most instructive competitor is the one that did try. Sam's Club has been running the identical model since 1983, inside the largest retailer on earth, and its American segment in fiscal 2026 reported gross profit of $10,556 million against operating expenses of $10,639 million². The merchandise operation lost $83 million. Every dollar of Sam's Club's $2,442 million operating income, and eighty-three million more, came from membership income. Costco's equivalent merchandise line earned $5,060 million³. Same format, same margin rate, opposite result — and the difference is sales per club, where Costco does more than twice as much.

Walmart is the honest counterexample and gets a page of its own, because on almost every measure other than club economics it is winning: $713.2 billion of revenue, an e-commerce business far larger than Costco's, and a retail media network Costco is only now assembling.

Amazon is the structural rival rather than the retail one — the other company that discovered you can charge an annual fee, and which uses it to eliminate the trip that Costco's whole model requires.

And the fourth competitor sits inside the warehouse. Kirkland Signature is roughly a third of Costco's sales⁴, which means the branded goods on the neighbouring pallet are simultaneously Costco's suppliers and the thing Costco's own label is taking share from.

What tests this facet is not market share, which Costco does not report and which is not what a club competes for. It is sales per warehouse: about $295 million on fiscal 2025 net sales across 914 warehouses, against roughly $155 million for the average Sam's Club.