Executive Briefings

Why Costco Loves Store Sales: You Try Shipping a Tub of Mayo

Costco Wholesale Corp., which built an empire selling products in bulk, hasn't felt the need to transfer that winning strategy online.

Why Costco Loves Store Sales: You Try Shipping a Tub of Mayo

"We want to get you into the store because you're going to buy more," Costco's finance chief Richard Galanti said last month when asked during the company's earnings call about its e-commerce growth. Costco attributes much of its success to the treasure-hunt atmosphere it creates in its 725 stores by cycling through new products to spur impulse purchases.

But in an era where people are shopping online for giant packages of everything from dog food to disposable diapers, more investors and analysts are pressing Costco to focus on e-commerce. Meanwhile, online retailers such as Amazon.com Inc. and newer players like Boxed.com are making inroads with consumers looking to buy in bulk.

“They are in an OK spot for now, but I don’t think that will last forever,” said Tim Campbell, a Kantar Retail analyst covering warehouse chains. “They need to get ready to compete with Amazon.”

Wholesale chains have been slow to embrace home delivery for online orders. Shipping half-gallon tubs of mayonnaise is expensive — especially as carriers move to charge by size in addition to weight — and profit margins are already low on most household staples.

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"We want to get you into the store because you're going to buy more," Costco's finance chief Richard Galanti said last month when asked during the company's earnings call about its e-commerce growth. Costco attributes much of its success to the treasure-hunt atmosphere it creates in its 725 stores by cycling through new products to spur impulse purchases.

But in an era where people are shopping online for giant packages of everything from dog food to disposable diapers, more investors and analysts are pressing Costco to focus on e-commerce. Meanwhile, online retailers such as Amazon.com Inc. and newer players like Boxed.com are making inroads with consumers looking to buy in bulk.

“They are in an OK spot for now, but I don’t think that will last forever,” said Tim Campbell, a Kantar Retail analyst covering warehouse chains. “They need to get ready to compete with Amazon.”

Wholesale chains have been slow to embrace home delivery for online orders. Shipping half-gallon tubs of mayonnaise is expensive — especially as carriers move to charge by size in addition to weight — and profit margins are already low on most household staples.

Read Full Article

Why Costco Loves Store Sales: You Try Shipping a Tub of Mayo