Is Costco’s “Meh” Attitude Toward Online Sales Hubris Or Good Business?

Image courtesy of Jenny Reiswig

By this point, bricks-and-mortar stores that haven’t also established a solid online presence are often put on death watch, but Costco continues to take a “we’ll get there someday” approach to its internet business without raising too many alarm bells. Is that shortsightedness or good business?

Costco does have an e-commerce site, which offers significantly fewer products than you’ll find in most Costco warehouses, but also sells things like Super Bowl tickets. Though the company does market its online offerings to members, it’s far from a primary revenue stream.

During a call for Costco’s most recent quarterly earnings, Chief Financial Officer Richard Galanti said [via Motley Fool] that the wholesale club tries “to not avoid it or be arrogant about” its online retail operations, while at the same time “we try not to freak out about it.”

Part of the reluctance toward bolstering Costco’s online presence is the membership aspect of the business. Just like its physical locations, shoppers need to be a member to buy from If you’re going to try to compete with Amazon, Walmart, and others, you’ll need to invest in more direct-to-customer distribution centers, customer service, and logistics. It might not be worth the investment if your customer base is limited by the membership requirement — and if those members are still happy with going to Costco to do their shopping.

Galanti says the company is even reluctant to get into a ship-to-store model, where customers buy online and pick up in the store. Customers who do that may be less likely to do any additional shopping when they come to get their online order, whereas the odds are higher that the traditional Costco shopper will pick up some items that aren’t on their list for that day.

“[W]e want to do everything possible to get them in the store and not just come and pick something up,” explained Galanti, adding that part of the Costco business model is “trying to get people in the store with treasure-hunt items, with fresh foods, with gas. So we will keep driving that.”

He said that, compared to shoppers who use services like Instacart to place online orders for same-day delivery, “the in-store visit is two-and-a-half to three times [bigger], if not a little more than that.”

At some point, competing online retailers offer selection and convenience could convince some Costco members to end their memberships, or at least pay fewer visits to the store. Galanti said that “things could change” eventually but for the time being “we’re going to take it steady.”

Only time will tell if Galanti’s words were wise or foolish, but there’s no reason we can’t take a poll:

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