- Millennial consumers are eschewing large club stores like Costco and Sam’s Club in favor of online competitors like Amazon and Boxed, according to a recent article by the Washington Post.
- Warehouse retailers have been slow to develop the digital side of their shopping experience, like offering online ordering and home delivery. Analysts the Post spoke with say this has turned off many digital-savvy millennials, who might otherwise engage with these stores.
- Failing to account for shoppers could be one of the reasons club stores are cutting back jobs and stores, according to the Post. Earlier this month, Walmart abruptly shuttered 63 Sam's Club stores. An analysis of Labor Department data by the Post, meanwhile, shows that warehouse clubs and supercenters cut an average of 2,500 jobs each month in 2017. This is a sharp contrast to previous growth between 2009 and 2016 when these same stores added an average of 3,000 workers each month.
When it comes to millennial shopping habits, perspectives on trends can vary. A Food Dive report from last year found that consumers at the older end of this demographic are actually highly interested in club stores like Costco. Still, there are parts of the shopping experience that warehouse retailers could improve upon if they want to keep a wider range of millennial shoppers signing up for memberships.
The first issue is one that saw improvement in 2017: digital. Costco added more e-commerce options, including free two-day delivery on non-perishable goods for orders over $75. The chain also partnered with Instacart to offer home delivery on perishable items.
Costco also has a mobile app that allows shoppers to build shopping lists, browse store specials, order online and send photos to a store printing center.
For their part, Sam’s Club and BJ’s both offer online ordering with in-store pickup, but only Sam’s offers a mobile app. In addition to this store app, which includes store lists, photo uploads, and special offers, Sam’s also recently rolled out a Scan & Go app that allows customers to scan items as they put them in their cart, then pay through their phone and leave the store.
These digital improvements are laudable, but they just don’t provide the same ease of home delivery as Amazon Prime. They're also not as nimble as the online app and ordering system Boxed features. That company, which has rocketed from $8 million in annual sales three years ago to $100 million currently, appeals largely to shoppers who want bulk products without having to lug them to their car, and then home, founder and CEO Chieh Huang said during a presentation at the National Retail Federations Big Show recently.
On the other hand, club stores have two things very important to this younger demographic: cheap prices and a unique store experience.
LendEDU, an online student loan refinancing marketplace, found that Amazon prices on average were 56.48% more expensive than the same products found at a Costco store shopped by company researchers. Costco, along with Sams and BJ's, also offer regular in-store sampling, and like to curate their product mix to be fun and surprising. Club stores have what analysts like to call that "treasure-hunt appeal" in spades.
Costco has made it a priority to add more organic and fresh options, which millennials value highly. In 2015, Costco announced it sold more than $4 billion worth of organic products, beating out Whole Foods as the leading organic retailer in the country
Costco is continuing to innovate to attract and keep these shoppers. Most recently the store announced plans to start offering meal kits, a first for the retailer. The kits will be fresh and free of artificial colors, flavors and preservatives. The ‘Chef Meal Kits’ will be initially offered at stores in Texas, with a nationwide rollout starting in February and continuing through the year.