Walmart and Costco are natural competitors. Both retailers have built their businesses around offering shoppers competitive prices, a wide selection of merchandise, and opportunities to save money.
But while the two companies share many similarities, they have different ideas about what keeps customers coming back.
Walmart has increasingly focused on making shopping more convenient, particularly through its growing delivery business.
Costco, meanwhile, continues to emphasize its in-store experience, giving members reasons to visit and discover products they might not have planned to purchase.
Now, Walmart is making another major investment in convenience that could give it an advantage over its warehouse rival.
Walmart sees delivery as a competitive advantage
On Nov. 5, Walmart announced a new multi-year agreement with drone delivery company Zipline to add 300 drone delivery locations across the United States, expanding a program that has already completed more than 2 million deliveries.
The move gives Walmart another way to attract shoppers who want everyday essentials delivered quickly without making a trip to a store. And that could become an increasingly important competitive advantage as consumers prioritize convenience alongside affordability.
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Walmart’s expanded partnership with Zipline will make drone delivery available to more customers nationwide, with tens of thousands of eligible items available for delivery in as fast as 30 minutes in areas where the service operates.
Customers can select drone delivery through Walmart’s website or app if their addresses fall within an eligible delivery area.
Zipline CEO and co-founder Keller Cliffton highlighted how consumer behavior has changed since the partnership began.
“Five years ago, Walmart and Zipline made our first deliveries together,” said Cliffton. “Today, customers order from us multiple times a day. When you can get what you need in 10-30 minutes it takes a huge amount of anxiety out of life. People can plan their lives around their loved ones, not errands.”
Walmart also offers several other delivery options, including delivery in 30 minutes or less in select markets and one-hour express delivery.
Expanding those options gives shoppers more reasons to use Walmart for everyday purchases rather than turning to competitors or third-party delivery services. It also creates opportunities for Walmart to increase shopping frequency and build customer loyalty.
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Costco continues to prioritize the warehouse experience
While Walmart may be focusing its efforts on keeping shoppers out of stores, Costco is taking the opposite approach.
Costco has built its business around membership loyalty, bulk purchases, competitive pricing, and an in-store shopping experience that encourages impulse buying.
The phrase “I came in for three things and left with a $150 bill” isn’t heard at Walmart on a regular basis like it is at Costco, or some version thereof. And that’s because the treasure-hunt shopping experience is a big part of Costco’s appeal.
That helps explain why Costco has not made rapid delivery expansion a central part of its strategy the same way Walmart has.
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Costco does offer online shopping and same-day delivery through third-party partners, including Instacart. But those services largely complement its warehouse club business rather than replace the experience of visiting a physical location.
In fact, given that 90% of Americans live within 10 miles of a Walmart store, it could make sense for Walmart to focus part of its effort on making the in-store experience more enticing.
Since distance isn’t a barrier, customers may be willing to forgo the convenience of delivery if they’re excited to actually enter a Walmart location and look around.
For now, Walmart clearly beats Costco when it comes to getting products to shoppers’ doors quickly. But Walmart may also want to learn a lesson from Costco — that faster delivery isn’t the only way to boost a company’s bottom line.
And if Walmart keeps doubling down on delivery, its business might grow in one regard and stall in another.
Maurie Backman owns shares of Walmart and Costco.
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