The notoriously penny-pinching higher-ups at Costco’s (COST) no frills headquarters in Seattle may want to spend a few bucks promoting the fact they have a functional website where millions of cardholders can actually buy stuff.
Or more specifically, where they can buy food online and have it delivered to their home. According to a new survey of 2,000 U.S. shoppers and 220 supermarket store managers by Citi, just 18% of Costco’s members shop the company’s website with some degree of regularity. And a mere 7% of Costco members have purchased food online.
Meanwhile, 65% of Costco members indicated that they have shopped on the site infrequently or not at all. In a prior survey done by Citi in September, that percentage was 62%.
Roughly 90% of those asked have never tried Costco’s online fresh food delivery option. Most of Costco’s members shop online for electronics.
Overall, Walmart and Amazon are the market share leaders in online grocery, according to Citi’s survey. Amazon stands at 24.6% market share of online grocery, compared to 22.5% for Walmart. Costco is at a paltry 5.9%.
What’s up with Costco?
Considering this is the age of digital shopping and Costco is generally beloved by its customers, it’s downright sad the retailer hasn’t gained more traction online. It’s also sad Costco has sat back and watched Walmart and Amazon aggressively promote their new online grocery delivery options. And notably at Walmart, it continues to tout its expanded number of online offerings and same-day delivery service.
Instead, Costco is plowing money into new store openings globally and lowering prices on products for members.
Only more recently has the company kicked into high gear online. Costco has expanded its online selection in top areas like Apple products and inked same-day grocery delivery deals with Instacart and Shipt. It’s also on the cusp of opening a new $100 million e-commerce fulfillment center in southern California. Two other fulfillment centers are expected to open soon after.
Costco’s online business represents only about 5% of its total business. Sales have been growing in excess of 20% the last several quarters.
Costco expects those growth rates to continue for now.
“Even as we hope and assume that it's going to grow at a higher rate than the rest of the company, it's still going to be in the single digits for a while,” Costco’s long-time Chief Financial Officer Richard Galanti told analysts on a March 7 conference call.
Citi analysts call online an area of “opportunity” for Costco. That may be an understatement.
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