<div id="readability-page-1">Costco Wholesale (COST 0.42%) has some amazing qualities that make it a retail destination for an increasing number of members under all kinds of circumstances. It's no wonder the stock keeps climbing despite its premium valuation. Amazon (AMZN -0.74%) is a different kind of retail beast altogether, and it's so much more than retail. Despite higher growth than Costco, its valuation has declined and it looks like a bargain today. Which of these retail giants is the better buy today? <div><img src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MzE2MTUvc2hvcHBpbmctZ3JvY2VyeS1tb20tYW5kLWJhYnktMTIwMHg4MDAtNWIyZGY3OS5qcGcmdz03MDA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="466" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MzE2MTUvc2hvcHBpbmctZ3JvY2VyeS1tb20tYW5kLWJhYnktMTIwMHg4MDAtNWIyZGY3OS5qcGcmdz03MDA"/>Image source: Getty Images. </div> <h2>The case for Costco: Steady and solid</h2> Costco has a famed membership model that breeds loyalty and generates high sales as well as creates a recurring revenue stream that goes straight to the bottom line. It has built up its business over several decades and now counts 79.6 million people as members. Costco's model stands out from the retail superstars of the world. Although there are competitors, including Walmart's Sam's Club and BJ's Wholesale Club, Costco is the largest warehouse retailer. Because it makes money from its membership fees, which were recently raised to $65 for a basic membership and $130 for a premium membership, it can keep the prices of its merchandise extremely low. It's famous for its $1.50 hot dog and $4.99 rotisserie chicken, for example, but it generally sells products in bulk for low prices, and it can negotiate with suppliers to get better deals since it buys so much. The low prices make it worthwhile for its millions of members to shop there and make the most of their annual memberships. Costco sports a very high renewal rate, which was 92.7% in the U.S. and Canada in the 2025 fiscal third quarter (ended May 11) and 90.2% internationally. Although the retail model has remained the same for decades, Costco has found ways to innovate. It's become a serious player in e-commerce, Amazon's territory, doing it in a way that works for its large warehouses by focusing on in-store pickup for bulky items. E-commerce sales increased 14.8% in the third quarter, driving total revenue growth of 8.2%. Costco has also been extremely successful in getting more people to sign up for the premium membership. These members account for 47% of the total as of the end of the third quarter, but 73% of sales. They get added perks like 2% cash back, and more recently, an exclusive shopping hour on the weekends. This is a model that thrives under all kinds of conditions and lends itself to further growth, which is why Costco has been such a spectacular stock to own for decades. It also pays a dividend, which has a low yield, but it has also periodically paid a special dividend, which was $15 in its most recent payment nearly two years ago. <h2>The case for Amazon: Much more than retail</h2> Amazon is also a retailer, but it's so much more. It has a completely different model that's all e-commerce, and its low prices, large assortment, and fast delivery times have helped it corner the market; it may have as much as 40% of the U.S. e-commerce market or even more, which makes it impossible for any competition to catch up in the short term, even if companies like Costco are leveraging their distinct features to make the most of e-commerce. Still, Amazon isn't leaving things alone. It constantly upgrades its marketplace with new merchandise, new brands, new technology, and faster fulfillment to stay on top. Although artificial intelligence (AI) is fairly new as a buzzword, and with Amazon, it usually refers to its cloud business, I would suggest that AI has played no small part in making Amazon what it is today. It has used AI since its inception to provide recommendations for its customers, and it has improved its capabilities to offer side-by-side comparisons of products and help customers make informed decisions and to press the button. But yes, the AI business it has today is the generative kind, which it offers through Amazon Web Services (AWS), its cloud services division. AWS clients can use Amazon's platform to create all kinds of AI apps using an array of large language models with varying levels of customization. Amazon isn't just the largest e-commerce company in the U.S., it's also the largest cloud computing company in the world, with about 30% of the market. It's still growing quickly, with a 17% increase in sales over last year in the second quarter. Amazon as a whole reported a 13% increase in sales, which is an impressive feat considering it's the second-largest company in the world by sales, with $670 billion in trailing-12-month sales. CEO Andy Jassy thinks this is just the beginning for the AI business, but it's already a multibillion-dollar business growing at triple digits. Amazon also has several other large, competitive businesses, including advertising and streaming, which make it such a compelling company to own as a stock. <h2>Valuation will make the call</h2> There are reasons to buy each one of these fabulous stocks. They are both industry leaders for a reason, and there's a lot to expect from both of them going forward. Let's get back to the valuation piece. <img src="https://imageproxy.pbkrs.com/https://media.ycharts.com/charts/299f97be5e6bf22989ca02e5a1d264ee.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="720" height="541" original-src="https://imageproxy.pbkrs.com/https://media.ycharts.com/charts/299f97be5e6bf22989ca02e5a1d264ee.png"/> COST PS Ratio data by YCharts Costco is trading well above its five-year average P/E ratio, while Amazon is trading at less than half its five-year average. However, that includes a short period where it had an unusual loss pertaining to an investment in electric vehicle company Rivian Automotive. Costco is much cheaper on a price-to-sales basis. While I recommend both of these stocks, Amazon still looks like the better buy today because it has so many different opportunities, especially in its two top segments, and it's trading at a rare discount. </div>

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Costco and Amazon are compared as potential stock buys. Costco's membership model fosters loyalty and generates steady revenue, with a high renewal rate and successful e-commerce growth. In contrast, Amazon dominates e-commerce and cloud computing, leveraging AI for customer engagement and product recommendations. While Costco offers low prices and dividends, Amazon's diverse business model and rapid growth in sales position it as a formidable competitor. Investors must weigh Costco's stability against Amazon's expansive growth potential.

- Costco Wholesale is recognized for its membership model, which fosters loyalty and generates significant revenue, boasting 79.6 million members and a high renewal rate of 92.7% in the U.S. and Canada.  
- In contrast, Amazon dominates the e-commerce market with a diverse business model, including cloud computing, and reported a 13% increase in sales, making it a compelling investment despite its lower valuation.  
- While both companies are industry leaders, Amazon is currently viewed as the better buy due to its growth potential and trading at a discount compared to its historical valuation.

Best Stock to Buy Right Now: Costco vs. Amazon