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Costco sticking to store-first approach

October 3, 2016Written by Tom Ryan

Photo: Getty Images

While Costco acknowledges shortcomings in its digital approach, Richard Galanti, EVP and CFO, last week inferred the wholesale club has no plans to become an omnichannel retailer. "Our value proposition is best served for us when it's in-store, getting members to come in and buying when they can see everything there that we have," he said on Costco’s fourth-quarter conference call. The response followed recent investor concerns over Costco losing ground to Amazon and that its secondary digital focus was a liability in attracting Millennials. Mr. Galanti said that Costco had no illusions that it was “Amazon proof” as some analysts have alluded. But he said the impact of internet selling depended on the category and the warehouse club overall was “impacted less” because of its unique membership model. In particular, he noted that 90 percent of members come to Costco for a fresh food item, a category that remains a challenge for online sellers. Said Mr. Galanti, “We’re glad that fresh is difficult.” He also said “part of our strength is what we do” and that includes not offering smaller-sized packages at budget prices or having a full assortment of products. Those features work against online selling and are even sometimes perceived as an inconvenience to shoppers. “We have never been big on convenience,” stated Mr. Galanti. “Our success has been based on pricing value, quality and quantity at the lowest possible price. We do appreciate that value also is convenience.” Online, Costco is enhancing category assortments and making the process more user-friendly. But Mr. Galanti stressed Costco is “not freaking out about” catching up to competitors digitally. For instance, while it may partner with an Instacart or Google Express in some regions, it has no plans to roll out two-hour grocery delivery. “You will see some differences and mostly the differences are from an offensive standpoint, not a defensive standpoint,” Mr. Galanti said of Costco.com. “But we look at our core business of getting you in the store still is paramount to what we want to do.”

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