Costco (finally) tests curbside grocery pickup

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Costco announced last week that it would begin offering members of the area’s warehouse club same-day pickup of 2,000 groceries and general merchandise. There is a minimum order of $ 100 to choose pickup, and a charge of $ 10 on each order, as the model “adds an extra expense to our low cost business model and limited markup structure,” states the company on its website.

Previously, the company only offered pickup for expensive items such as jewelry and electronics, saying it was expensive to offer a wider offering. Some Wall Street analysts have questioned whether Costco should expand the service to other products as curbside pickup explodes in popularity.

Richard Galanti, chief financial officer of Costco, said the company wanted to test it in a small market.

“We’re always trying different things. We’re still scratching our heads on it a little bit. We figured we would try it in a low-key market where there are only a limited number of sites,” he said. told CNN Business. “And it’s really nothing more than a test at this point.”

Costco (COST) has dedicated parking spaces for customers arriving to pick up their orders at each of the Albuquerque stores. Employees prepare orders online and take them to customers’ cars. Customers will purchase their orders and pay on Costco’s website.
Costco’s test presents itself as competitors, such as Walmart (WMT), Kroger (KR) and Amazon (AMZN)Whole Foods, owned by Whole Foods, has also expanded its own curbside pickup offerings during the pandemic.

Costco’s new pickup option has a minimum order threshold and higher fees than other chains. Walmart, Kroger, and Whole Foods offer free grocery pickup for orders over $ 35.

In recent years, Costco has said grocery store pickup doesn’t make sense to offer, mainly because the club doesn’t have much room in its crowded stores and parking lots to organize pickup logistics. . The option requires a staging area inside the store for workers to assemble orders, a cooler space to keep items fresh, and dedicated parking for customers arriving to pick up their groceries.

“You have to have a place to put things away,” Galanti said in an interview last year. “You can’t store it at room temperature. You have to separate it into refrigerated, frozen, and dry.”

Costco, which operates on razor-thin profit margins, also says it’s too expensive for its business to have dedicated employees picking customers’ orders and getting them to their cars.

And Costco wants shoppers to come to warehouses, where they often make unexpected purchases while browsing. The pickup robs Costco of this opportunity to drive sales.

“We want you to walk around the warehouse and see what we have to offer,” Galanti said.

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