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Better Late Than Never: Costco Launches Online Grocery Options

Better Late Than Never: Costco Launches Online Grocery Options

The growth of online delivery and price wars have been the two biggest grocery buzzwords this year, especially in the wake of the Amazon-Whole Foods and Albertsons-Plated acquisitions. Now one of the sector’s largest retailers is stepping in with competition of its own.

Costco, previously not known for e-Commerce sales, launched its online grocery shopping and delivery service CostcoGrocery earlier this month. The service offers approximately 500 non-perishable dry grocery items that will be delivered free to Costco shoppers with orders of $75 or more.

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The retailer also plans to expand its  partnership with Instacart, currently available at 376 U.S. locations. This service provides same-day delivery of approximately 1,700 fresh foods, dry and non-perishable items via a “white label” arrangement.Prices on the goods purchased for same-day delivery are anticipated to be approximately 15% to 17% higher than in stores, according to a report from the Los Angeles Times.

Costco also will provide two-day delivery with an expanded selection of dry and non-perishable goods. Instacart will not power this delivery option. The combination of services will expand Costco’s reach beyond consumers that live close to one of the retailer’s warehouse locations.

The launch should quell concerns that Costco has lagged in its e-Commerce initiatives. With membership renewal rates declining quarter-to-quarter from 87.5% to 87.3%, in part due to the Costco credit card changeover from American Express to Visa, investors have questioned the club retailer’s online prowess as a growth driver.

Despite its brick-and-mortar roots and the questions surrounding the expansion, the company has kicked e-Commerce further into gear, posting 21% online sales growth in Q4, an improvement over its full-year growth rate of 13%. And September numbers look even more promising, with the growth total once again jumping to 30%. Walmart and Target have shown over the past year that it wasn’t too late for them to bolster their digital offerings and fulfillment options, even though both had lagged heavily behind Amazon.

At this rate, there was no excuse for Costco to continue delaying the inevitable, regardless of the company’s traditional business model. Costco now has the opportunity to move ahead of its major rivals in the club retailing space. The same-day delivery option will be available at 376 of Costco’s 514 U.S. locations, significantly dwarfing competitor BJ’s Wholesale Club’s same-day delivery from 18 locations in six states. Sam’s Club already has its own grocery delivery service for select non-perishable items, but has only partnered with Deliv on a same-day delivery test in Miami.

Costco presently operates e-Commerce web sites in six countries: the U.S., Canada, the UK, Mexico, South Korea and Taiwan.

 

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