Costco has a simple business model. It sells memberships, and only members can shop in its stores.

In exchange for paying $65 for a Gold membership or $130 to be an Executive member, which comes with added perks, including 2% cash back on most purchases, members get low prices.

Costco generated $5.3 billion in membership fees in fiscal 2025, according to its fourth-quarter earnings call.

“That sounds modest compared to $275 billion in total sales. But net income, what the company actually kept after all its costs, was $8.3 billion. Do the math. Membership fees accounted for roughly 64% of Costco’s profits,” wrote TheStreet‘s Aditya Raghunath.

Costco has essentially built its business around keeping its members happy at the expense of being able to sell to non-members. Walmart has figured out how to layer membership on top of a classic sales model.

That’s giving Walmart a best-of-both-worlds scenario that’s good for customers, shareholders, and the company.

Walmart grows its membership business

Walmart has been working to diversify its revenue outside of just being a retail store. That strategy has been working, CEO John Furner shared during the company’s first-quarter earnings call.

“For the quarter, our Advertising business grew more than 30% for each segment, including 36% for Walmart U.S. Membership fee revenue grew 17% for the enterprise, led by Walmart U.S. Together, these profit streams represented approximately one-third of operating income,” he said.

That’s not equal to Costco’s 64% of operating income, but it’s a massive pivot for a chain built on the traditional retail model. Walmart has also experienced a sales lift from members.

“Walmart+ membership fee revenue growth accelerated with net adds reaching a new Q1 high. This growth is encouraging as Walmart+ members generally spend 4x more than nonmembers overall, with 7x more eCommerce visits each year,” CFO John Rainey said during the call.

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He also noted that members are taking advantage of some of the perks that come with joining.

“And in this period of elevated gas prices, members are tapping into their fuel savings benefits even more today, reinforcing the value of membership beyond free shipping,” he added.

Walmart+ FAQ

• What is Walmart+? Walmart+ is Walmart’s paid membership program that offers savings on grocery delivery, shipping, fuel, streaming, and other shopping perks.
• How much does Walmart+ cost? $12.95 per month or $98 per year, and eligible college students and government assistance recipients can join for 50% off ($6.47/month or $49/year).
• What benefits do Walmart+ members get? Free grocery delivery from local stores on eligible orders of $35 or more. Free shipping from Walmart.com with no order minimum. Ten cents off per gallon of fuel at participating Walmart, Exxon, Mobil, and Murphy stations, and member pricing on fuel at Sam’s Club gas stations. Choice of a Peacock Premium or Paramount+ Essential streaming subscription. Early access to select Walmart deals and events, access to Walmart+ Travel rewards and other member offers, and more. Source: Walmart

Most people see Walmart+ as the chain’s answer to Amazon Prime.

I see it instead as an add-on. I’m not dropping Prime to shop at Walmart, but you can’t stop into an Amazon store when you need something right away, and the online retailer doesn’t offer gas discounts.

Walmart+ offers in-store and online benefits.

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Walmart offers the best of both worlds

By offering a membership but continuing to operate as a traditional retailer, Walmart can serve a bigger audience than Costco. Walmart allows non-members to shop in its stores, although they will pay higher prices.

Costco does not allow non-members to shop in its clubs at all. Even if you were OK with paying higher prices, you wouldn’t have the option of not joining.

If a Walmart customer declines to buy a membership, nothing about the shopping experience changes. But Walmart+ offers a number of perks that should save them money.

“This is a massive shift for Walmart,” RTM Nexus CEO Dominick Miserandino shared with TheStreet. “One third of their revenue is basically outside of the usual, trying to get them in the stores model.”

He sees the move as Walmart taking the best of what Costco does and appropriating it, while not sacrificing any of its traditional operations.

“Now, you have them doing the annual membership as well as monetizing their ad network, which really creates a situation that diversifies any risk of getting them in the store and copies quite well the Costco model of that,” he added.

GlobalData Managing Director Neil Saunders commented on Walmart+ before 2024’s Walmart+ week, a sales event similar to Amazon’s Prime Day.

“Walmart will use the occasion to drive membership of its program, something it is keen to do as members spend more on average and are more loyal to Walmart,” he told Retail Dive.

The challenge for Walmart is proving that customers see enough ongoing value to renew, something every paid membership program must overcome.

Walmart does not disclose the total number of Walmart+ subscribers, making it difficult to measure the program’s full scale.

Related: Costco makes a silent gas change that members will love