Here’s How Costco Is Making Sure Its Ecommerce Offering Is Passing Muster
Ecommerce has seen its dominance of the retail space grow even faster in the wake of the COVID-19 crisis and we are seeing many brands which previously had a strong focus on physical retail fully embrace the benefits of online shopping.
One such sector of retail is the big-box or wholesale retailer. Brands in this area normally leverage the power of in-person shopping to push deals of the day and whatever product is available to them in the moment, but even these stores are now investing significant resources into their ecommerce offerings.
Perhaps the most well-known retailer in this space, big-box wholesaler, Costco has been at the fore of this trend and has seen its own ecommerce sales rise in the face of changing shopper behavior.
Costco
In the fourth quarter of 2021, Costco saw ecommerce earnings increase 11.2% year over year and 44.4% for its fiscal year and downloads of its smartphone app exceed ten million during the same period.
The earnings for the same period in 2020 were negatively impacted by increased expenses – including wages and sanitation – brought about by the pandemic, but now the worst of the crisis seems to have passed, these expenses have lessened and made room for an increase in overall value.
"It’s continually improving with additional features coming soon," said Costco Executive Vice President and Chief Financial Officer, Richard A. Galanti. "Digital payment using the Costco credit card – it’s in pilot in several locations with full rollout by the middle of next month. The ability to view warehouse receipts online also will happen next month. And by October end, when we will have an improved mobile site, improved look and feel, a new landing page and expanded information both for dotcom use and for enhanced warehouse information."
Expanding Ecommerce
To build on the successes detailed above, in December 2021, Costco announced its intention to further expand its ecommerce capabilities with click and collect pickup lockers and increased investment in its marketplace feature.
During 2022, Costco intends to double the number of locations where its pickup lockers are available. At the time of the announcement, Costco had just 112 locations where the lockers were installed but plans to exceed 200 by the same time this year. The pickup lockers provide a way method for customers to order products online and collect them from a local Costco store contact free – increasing convenience and reducing the opportunities for transmission during crises such as COVID-19.
To further cement its image as a wholesale retailer, Costco also has its Costco Next Marketplace function. Through Costco Next, customers can browse a curated selection of limited-supply items which they can purchase directly from the retailer’s most trusted suppliers.
The Costco Next marketplace was introduced back in 2017, but the company has announced that it plans to further invest in the platform and introduce new brands during 2022. Costco Next has prices 20% below the average cost of the same products elsewhere which helps customers save money while simultaneously taking some of the supply chain pressure off Costco itself.
Costco is also planning to add same day delivery options in Texas through a partnership with Uber. Improving its capabilities regarding the rescheduling of ecommerce deliveries, returns, and collections. Improving labels on fulfilment options to help shoppers easily determine which products available where – including whether nearby warehouses have the right number of a particular item in stock – and rolling out ecommerce kiosks, complete with video signage and touchscreens, which customers can use to place ecommerce orders in store.
Behind the scenes, Costco is further augmenting its ecommerce capabilities with a commitment to increasing the footprint of its warehouse fulfilment centers. By the end of 2022, Costco fully expects to have added 28 additional warehouse units to its network and expanded inventory in all of them – expecting to have all its warehouse inventory, as well as Instacart inventory available.
This investment will help Costco deliver ecommerce orders in a timelier fashion and make sure customers aren’t left waiting for key products or disappointed by a lack of inventory when they do go to place an online order.
Final Thoughts
Costco’s significant gains in the ecommerce space demonstrate the need for wholesale brands and big-box stores to embrace the benefits of ecommerce adoption and/or investment. While there will likely always be a need for physical shopping experiences in this corner of retail, ecommerce and omnichannel needs to play a role alongside it.
The benefits omnichannel and ecommerce technology can bring to stores such as Costco are sure to be hot topics at eTail Canada 2022, taking place in September at the Hyatt Regency Toronto, ON.
Download the agenda today for more information and insights.