Will curbside pickup be Costco’s Achilles heel?
Costco’s membership business model certainly isn’t broken and so there doesn’t appear to be a need to fix it. That said, some believe that the biggest warehouse club in the land is in danger of losing sales to other retail rivals as they cater to consumers’ newfound appreciation for curbside pickup.
The company has said that its clubs are not set up to properly handle the pickup of online orders. It has also touted the benefits of getting members into its clubs to make incremental purchases. While no one is denying the latter point, in particular, some think that Costco is ceding grounds to its retailing rivals.
Sam’s Club and BJ’s Wholesale Club, Costco’s most direct competitors, both offer free curbside pickup at all their U.S. locations. For Sam’s the offer extends to customers with a Plus membership. BJ’s offers the service free to all its members.
Costco is “behind the ball,” Timothy Campbell, an analyst at Kantar, told CNN. “They risk falling behind if they don’t invest in pickup. You have customers establishing routines with other retailers.”
Speaking on Costco’s fourth-quarter earnings call yesterday, CFO Richard Galanti addressed the chain’s thinking on offering pickup at its clubs. “We continue to look at what others do, we continue to scratch our head a little bit,” he said. “It’s not that we’ll never do it, but it’s not on the agenda for this week.”
Retailer results and consumer research point to curbside pickup remaining popular and possibly growing more so with American consumers. Fifty-nine percent of consumers said they were more likely to use curbside pickup following the coronavirus pandemic. A RIS News study found that 44 percent of retailers were using curbside pickup and a third of those without it were pushing to add the service as soon as possible.
“We think curbside is going to be exceptionally sticky,” McKinsey senior partner Sajal Kohli told Yahoo Finance last month.
“The fundamental question for most retailers is, if you think about the retail box and the physical footprint, what’s the strategic intent of the box in the world of omnichannel post-COVID? Some categories are still going to be incredibly conducive to in-store interaction, but for several categories, I think consumers discovered this newfound convenience and they will actually stick to curbside, which has massive implications, as you can imagine, for retail.”
- Costco is missing out on an exploding grocery trend – CNN
- Costco Wholesale Corporation (COST) Q4 2020 Results (Earnings Call Transcript) – Seeking Alpha
- Is curbside pickup just getting started? – RetailWire
- Curbside pickup is ‘exceptionally sticky’ and will continue post-pandemic: McKinsey retail expert – Yahoo Finance
- How can retailers differentiate curbside delivery? – RetailWire
DISCUSSION QUESTIONS: Do you think Costco is ceding sales to competitors because it doesn’t have a pickup option at its clubs? Is there a P/L case to be made for curbside pickup or is Costco correct in its assessment that the service doesn’t make financial sense?