Costco Is Thriving Because People Still Don’t Buy Their Toilet Paper Or Steak On Amazon

Image courtesy of (joelgoodman)

As retailer after retailer closes up shop, and big box stores like Target and Walmart put increased focus on e-commerce, Costco continues to not only stay open, but to grow, despite having virtually no online retail presence. Why? Because people aren’t yet turning to Amazon to fill up their kitchens, bathrooms, and laundry rooms.

The warehouse retailer announced its latest quarterly earnings today, and in a call with analysts, Chief Financial Officer Richard Galanti shared the news that comparable store sales for the last nine months are up 3%, and sales across the whole company are up 8% compared to the same period last year.

Costco is beating the odds by offering things that. things that are impossible or annoying to order online. Most of what people go to the warehouse club for is food, and the top sellers in food are booze, deli items, and candy. While other physical stores (except Walmart) complain that foot traffic is down, Costco knows that its members are visiting 4% more often than they were last year.

Gasoline is an important thing that brings customers back to the physical store, getting customers into the parking lot. While they’re there, they might as well walk around the store and see what special items are around that day.

That’s another factor that Galanti cited: The “treasure hunt,” or finding special one-off items that won’t be there next week or even tomorrow. Sure, it’s exciting to grab a box of Kirkland Signature golf balls online, but people just love an in-person treasure hunt.

Costco is very slowly expanding its online presence, running fulfillment out of 19 distribution centers. It comprises 3.5% of the company’s sales and increases modestly.

Consumers overall have been resistant to grocery shopping online, wanting to pick out their own produce.

Specific to Costco, in some markets, Instacart is catching on, partly because it makes Costco’s inventory available (at a markup) to non-members in 40 cities, with orders coming from 240 stores.

What Costco doesn’t plan to do, Galanti emphasized a few times in response to analyst questions, is keep up with competitor Walmart (which also owns the warehouse chain Sam’s Club) by acquiring e-commerce companies and increasing its online sales in less than a year. You know, like how Walmart bought Jet.

“We’re doing things offensively, not defensively, online,” he told listeners, mentioning e-commerce acquisitions directly or indirectly multiple times during the call. Instead of imitating competitors like Walmart, Costco plans to do its own thing and gradually offer more of its merchandise to online shoppers.