Costco ups its delivery game for online orders
Costco is all about attracting members to its warehouse clubs. While the company has increased its presence online and even partnered with Instacart on home delivery in some markets, it has kept its focus on that objective. Even this week, when the company announced the rollout of two new delivery options, Costco maintains that attracting members to its clubs is still the goal.
Richard Galanti, Costco’s chief financial officer, announced on the retailer’s earnings call this week that the company has rolled out two new same- or two-day delivery options for club members.
“CostcoGrocery” offers two-day delivery from a selection of approximately 500 non-perishable grocery items. Boxes, weighing up to 40 pounds, are shipped using UPS to customers in the lower 48 states. Orders of $75 or more are shipped free.
Mr. Galanti (via Seeking Alpha) said many of the items that are part of CostoGrocery are being offered at a “significantly better price” than before on the company’s site and that Costco expects “to expand these offerings over time.”
Costco also announced the expansion of its same-day delivery of roughly 1,700 fresh grocery items in partnership with Instacart. The “white label” service is currently available through 376 Costco warehouse clubs with plans to add it at an unspecified number of clubs between now and the end of next year. A 10 percent fee is added to orders over $35. Costco’s CFO said pricing on products offered through Instacart is “very competitive” and “better than before.”
Analysts on the earnings call questioned Mr. Galanti on what expanded delivery would mean for club traffic.
Based on the chain’s experience with delivery in recent years, Mr. Galanti said Costco has found that members use delivery for more for “fill-in” shops. While seeing a slight decline in club visits, that has been offset by “several more shops” made using delivery. In the end, however, Mr. Galanti admitted that Costco had “very little time and data to feel comfortable about where it will go.”
Costco posted a 3.8 percent gain in same-store sales and an increase of nearly nine percent in profits for the quarter ending Sept. 3.
- Costco Wholesale Corporation Q4 2017 Results (Earnings Call Transcript) – Seeking Alpha
- Costco rolls out same-day and two-day online grocery delivery – Puget Sound Business Journal
- Does Costco need to follow a different path online? – RetailWire
DISCUSSION QUESTIONS: What do you make of Costco’s decision to expand its delivery options? How do you expect this to affect its club business?