Costco posts robust 43% e-commerce jump in April
- Costco reported a 43% increase in e-commerce sales during the month of April, according to reports. That’s up from the 34% jump reported during its most recent quarterly earnings in March.
- Net sales for the month were up 12.1% to $10.81 billion, while same-store sales increased 7.3%. Costco attributed a small portion of the increase to having an extra day compared to last year due to an Easter calendar shift.
- Costco currently offers two-day delivery of several hundred nonperishable grocery products. It also is expanding its partnership with Instacart, which delivers from around 500 of the company’s warehouses and should deliver from all locations by the end of this year.
When Costco began ramping up its online programs last year, there were concerns — most notably from the retailer itself — that these would distract from a store experience that is central to the company’s appeal.
But the opposite is proving to be true. According to analysts, these April results further prove that Costco’s e-commerce offerings are complementing store visits and building sales among a very loyal and affluent customer base. The average household income among Costco shoppers is around $73,000, reports show.
“The company’s online efforts are driving increased share of a very loyal customers’ wallet spend and expanding its brand reach (vs. limiting store visits),” JP Morgan analysts wrote in a note this week.
Costco has slowly built up its online grocery offerings, and now offers a broad assortment through the channel. Last fall it launched Costco Grocery, a two-day shipping program for nonperishable goods that utilizes the company’s fulfillment warehouses. The program offered around 500 products at launch and has added hundreds more in recent months, CEO Richard Galanti said during Costco’s most recent earnings call.
The club retailer also is expanding grocery delivery with Instacart, and expects to offer the service from all of its stores by the end of this year. This builds on Costco’s efforts to expand its fresh offerings, including a robust organic assortment. Altogether, perishable groceries are driving store trips for Costco, and they’re boosting engagement online. In the March earnings call, Galanti said the company is seeing larger-than-average orders through both Instacart and its two-day service.
In addition, Costco has ramped up promotions around its in-house and Instacart delivery options, and this has clearly driven gains.
At the same time, Galanti noted Costco is seeing fewer store visits from its online shoppers. This could become problematic over time, since the in-store treasure hunt is what cements loyalty for shoppers. To address the issue, Costco has begun offering more limited-time sales and other offers meant to drive traffic to its stores.
Observers have worried about Costco’s exposure to Amazon, since many of the club retailer’s members are also Prime members. But Costco continues to show that a winning store experience combined with a solid online offering so far have made it Amazon-proof.
Follow Jeff Wells on Twitter