Costco Grows E-Commerce 28%, Outlines Digital Next Steps

Despite a reluctance to embrace industry digital standards, Costco's online presence is still growing.

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Need to Know

  • Costco’s earing reports reveal the retailer’s total revenue rose 11% to $39.07 billion during Q4, with e-commerce sales increasing 28.4%.
  • While retailers like Target and Walmart reported less-than-expected sales during the holiday season, Costco flourished, attributing much of the sales growth to its strong seasonal performance.  
  • The earnings call revealed the retailer’s plans to grow its e-commerce offering and explore other ways to connect with its customers. The plans include mobile app and virtual membership development as well as extended buy-online-pickup-instore options.
  • Despite industry-wide adoption and success, Costco is still hesitant regarding buy online, pick up in-store, saying “We’re not at the point where we’re looking for members to buy online, they come up and pick up their whole grocery baskets.”

Analysis

With its e-commerce sales growing, Costco is looking for ways to connect with shoppers outside its traditional brick-and-mortar models. 

In the big-box retailer’s most recent earnings call, Costo reported an e-commerce sales increase of 28.4%, substantial growth considering many major retailers struggled during the holiday season. Investments aimed at boosting its online presence helped the grocer show positive growth despite competition from giants Walmart and Amazon. 

Some of the growth can be attributed to the grocer’s online grocery service, with its numbers surpassing store comparables.

“In terms of total online grocery, that continues to grow at a faster rate than the store comparables both today and [through] Instacart. Although the sales penetration is still very small, the sales are quite large in the high double-digit range year-over-year,” Costco CFO Richard Galanti said on the call. 

Looking ahead, the grocery giant has plans to further develop its new mobile app and boost enhancements to its fulfillment processes. Customers can expect more updates surrounding both developments later this year. “We’re working on more things related to our app, to our membership digital app,” Galanti said. “And we certainly have some things going on on the fulfillment side of e-commerce.” 

Despite the surge in popularity and success of buy-online pickup in-store offerings, Costco isn’t totally on board with a store-wide rollout and continues to look for a way for the service to fit within their offering. 

“We’re doing buy online and pick up in-store for some small items – small high-value items. But we’re not at the point where we’re looking for members to buy online, they come up and pick up their whole grocery baskets. So we’re trying to figure out our way,” Galanti said. 

Loblaws, however, has a different stance on the service. Click-and-collect remains the highest-growth and highest-revenue generating e-commerce option for the Candian grocery chain. Target also reports growth with its order-ahead and drive-up services and recently announced plans to offer additional grocery items and adult beverages. 

Despite its reluctancy to roll out an expansive buy-online, pick up in-store program, Costco plans show that the grocer understands the need for an online and in-store experience correlation to remain relevant and compete with the giants holding the top spots in the retail world.

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