Does Costco need to follow a different path online?
There’s one thing you can say about Costco’s management team. They are confident in the company’s position in the marketplace and don’t feel the need to follow what retail rivals are doing even when Wall Street wants them to do so. Richard Galanti, Costco’s chief financial officer, made that clear on the company’s quarterly earnings call earlier this week.
As on past calls, Mr. Galanti talked about Costco’s e-commerce efforts. While he mentioned steps the company was taking to improve its performance in this area, he also made clear that Costco’s greatest focus was its warehouse club operations.
Mr. Galanti described online sales for the latest quarter as “pretty choppy” with comps up seven percent overall. He said sales fluctuated from being up by mid-single digits at the start of the quarter and to up low-double digits at the end.
Costco’s CFO said the company was looking to improve its merchandise mix online including “adding more exciting high-end brands in merchandise on an everyday basis.”
He also said Costco was improving its online search function, shortening the steps to check out, making it easier for customers to track orders and automating returns.
Mr. Galanti also said Costco is improving its distribution logistics.
“We have increased the number of depots from where we fill online orders, so closer and faster and less expensive delivery,” he said (via Seeking Alpha). “And again, look for more improved and quicker distribution comments from us in early calendar 2017.”
Asked about the split between e-commerce sales coming from mobile devices, Mr. Galanti said Costco has trailed industry averages on that front, but that those numbers are “improving quickly.”
He also said that while Costco had looked at click and collect, it didn’t make sense at this point because of the space it would require in clubs to make it work. Making room might be a good idea if volume at club locations was down, but that isn’t an issue at Costco locations. He also said there were not a lot of requests from members for Costco to add the service.
- Costco Wholesale (COST) Q1 2017 Results (Earnings Call Transcript) – Seeking Alpha
- Costco Wholesale Corporation Reports First Quarter Fiscal Year 2017 Operating Results – Costco Wholesale Corporation
- Costco sticking to store-first approach – RetailWire
DISCUSSION QUESTIONS: Should Costco pursue e-commerce and omnichannel initiatives more aggressively than it currently appears to be doing? What do you see as the biggest threat to Costco’s continued success? Where do you see areas of opportunity?