Is Costco Stock In Danger Of The “Amazon Effect”?


Amazon is a retail and tech giant in its rights, and it has proved tough competition for all the other businesses in its industry. In 2017, Amazon took over Whole Foods, and that resulted in supermarket stocks plummeting in the stock market. Now, stock market analysts fear that Costco stock will face the same dangers from Amazon. 

Market analysts have observed that Amazon acquires new markets by undercutting its competitors in the price of its products. They gain larger market shares by accessing their loyalty programs from Amazon Prime. As per sources, the giant is planning on moving to other segments. In particular, Amazon will now be moving on from the grocery industry to the Fresh supermarket. 

Costco stock has favorably done well in its industry since it holds a majority of consumers. It’s clear that Costco is a name to reckon with in the warehouse retail industry. Now, since Amazon is looking to expand markets, investors are worried that Costco stock will feel the brunt of it. Moreover, Amazon is already challenging Costco with its Amazon Prime loyalty program, which is quite similar to the membership program provided by Costco. 

Costco Stock Over The Past Years

Costco stock
Costco stock

As mentioned earlier, back in 2016, several retail companies, including Costco, saw plummeting stocks after Amazon acquired the retail industry market shares. In 2016, Costco stock saw a decrease of 1 percent. Meanwhile. The company’s Forex and international sales increased by only 4 percent, which is significantly lower than its 2015’s sales growth of 7 percent. In the same year, Costco stock bought in $5.33 earnings per share, which fell from $5.37 in the previous quarter. 

Costco made a comeback after that by introducing free 2 days delivery and instant delivery in perishable items. Costco stock improved significantly after this. The company’s growth accelerated and its profits increased. Its online activities played a major part in improving its status. 

Moreover, since Costco partnered up with Instacart, its investment in e-commerce has proved to be very beneficial since the COVID-19 lockdowns. As per reports, the e-commerce sector has seen an increase of 91 percent in sales. 

Amazon And Costco Fighting A Battle With Same Tools?

Both companies provide similar benefits to their customers. They depend on consumer loyalty by rewarding their loyalties with certain incentives. Amazon has its Prime loyalty program. Costco, also, has a membership program that functions in similar ways.

The one thing that Costco stock has on its side is great bargain prices. The company sells its products at insanely low prices and makes a majority of its profits through membership programs. 

Furthermore, Costco has high-quality products, their employees are reportedly well paid, and their production value is top-rated. All of this makes the company one of the best retailers in the wholesale industry. 

Only time will tell if Costco stock can survive the “Amazon Effect.”