Dive Brief:
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As more and more shopping moves to the digital realm, warehouse shopping giant Costco continues to aim to bring customers in-store — not online, according to an article in The Wall Street Journal.
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To a certain extent, Costco officials say their formula “ain't broke, so we don't have to fix it.” They offer a “treasure hunt” to shoppers who never know what bargains lay around the next aisle end. Finance chief Richard Galanti told The Wall Street Journal that the warehouse retailer is "a little late to the game on purpose."
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Online sales accounted for about 4% of Costco's annual revenue in the last fiscal year. It's been moving more products slowly online, mostly cosmetics and clothes. Costco sells about 10,000 products online, and 3,700 in-store.
Dive Insight:
Even experienced members of the retail community marvel at the range of products and prices presented. From the electronics and home appliances available at knockdown prices, through the meat, produce and frozen/refrigerated sections toward the rear, many wonder how they offer these goods at these prices.
The answer is simple: Costco shoppers are lured into a magic wonderland of low prices. So low, in many instances, that shoppers feel they have “extra” bucks to spend — so spend they do.
Move that shopper online and you lose the store's “treasure hunt” appeal.
Costco has acknowledged that it needs to do more online. But you can expect it to make strong moves into the delivery arena soon, possibly through lower-price contracts with FedEx and UPS. Amazon already ships several staple goods through its Prime program and Prime Pantry model.
The warehouse store might also make a strong move in local delivery, since warehouse-sized products are heavy and expensive to ship. Costco recently partnered with Shipt to offer home delivery in the Tampa area, and it offers home delivery near San Francisco through Instacart. If this model works, it could create a more loyal customer base — including more millennials with young families, who say they like club shopping more than the average person.
The direction the warehouse store goes will be indicative of the future of brick-and-mortar shopping. Regardless of the luster of online shopping, studies show that many people actually prefer going to the store. Perhaps Costco's strategy will pay more dividends than some predict.