Latest News
News Feature image

Costco has announced two new developments in its ecommerce offer.

More News

Costco is setting-up an online shopping website in Australia, with launch expected in early 2019.

The online offer...

Costco is in the early stages of developing an online shopping platform in Australia in preparation for Amazon's imminent entry to the market. The retailer will build one the largest dedicated warehouses in the country on the Oakdale Estate in Sydney to service the planned online website.

Costco first entered Australia in 2009 and has grown strongly, driven by both existing store growth and new store openings. It currently has nine stores nationwide and is planning a 10th, due to open next year in the Bundamba complex in Ipswich, west of Brisbane.

Together with physical store expansion, its online offer should help support the growth of the business. It should also provide another stream of revenue, but has Costco’s decision to move online come too late? Price remains the key growth driver for the likes of Aldi and Costco, the fastest growing retailers in the Australia. Online should provide even greater access to customers searching for deals and offers.

We review Costco's latest performance and growth opportunities as it gets ready to open its first club in France.

Competition in France will be intense

Costco is embarking on the next phase of its European expansion from a position of strength. Its third quarter revenue increased by 7.8% to $28.9bn, while comparable store sales, excluding fuel and currency impacts, increased by 5%. The first outlet in France is expected to open around June 22, and follows on from the opening of its first club in Iceland this month. The retailer will open into an intensively competitive market in France, with global retailers including, Carrefour, Casino and Auchan, and price-focused retailers, Leclerc and Lidl, likely to be well prepared for its debut.

Maintaining cautious approach to e-commerce growth

E-commerce continues to be a key opportunity for Costco. Channel sales increased by 11% in the quarter. This is an area of major focus for the business, having been relatively slow to embrace the channel. Over the last year it has focused on improving the offer and online experience, including expanding the range of products offered under its Kirkland Signature private brand. It has also increased the number of fulfilment points from 9 to 17, using existing distribution centres, and started to test direct delivery from club in one location. Costco has also expanded the scope of its third-party partnerships. Instacart's city coverage has increased from 26 to 40, and currently operates from 240 clubs.

Potential to grow Business Centres to 40 outlets

During the quarter Costco opened its first Business Centre in Canada. This marked the first international expansion of the format which focuses exclusively on the needs of small to medium sizes businesses. This includes restaurants, convenience stores and professional services such as doctors’ offices. Operating with a slightly smaller footprint than the core format, it does not offer services such as optical, bakery and butchery, while clothing, toys and sporting goods are not sold. Ranges include equipment and appliances, restaurant supplies, cleaning products and grocery items, with the majority of the latter sold in case pack sizes.

Similar to e-commerce, the retailer has taken a relatively cautious approach to developing this concept, having opened the first Business Centre over ten years ago. Four new outlets will open this year, taking the total to 18. Costco estimates an initial opportunity for 30-40 Business Centres in North America, and while expansion is to remain at a relatively modest pace of three to five new outlets each year, success in Canada could pave the way for it in other Costco markets.

As Costco announces a new delivery partnership with Shipt, we look at how the retailer is starting to ramp-up its ecommerce activities.

Potential to expand the service to 50 US markets

Costco will initially work with Shipt in the Florida market for home delivery, before potentially expanding the service to 50 markets across the US by the end of the year. Shipt operates slightly differently to a number of other delivery services such as Instacart and Lyft, charging members an annual fee of $99 for unlimited deliveries. The company aims to deliver orders to customers within an hour. It is currently working with a range of retailers in the US including HEB, Meijer and Publix.

Ecommerce sales improving as investments continue in the channel

Over the last two years Costco has been ramping up its investments in ecommerce. These have focused on enhancing the merchandise offer through introducing more exciting and value-added products and improving the availability of high velocity items. It has also sought to improve the customer experience through improved functionality including a shortened checkout process, better search, and better order tracking. Costco has also been focusing on optimising distribution and logistics through increasing the number of fulfilment locations, bringing it closer to the customer and reducing shipping costs. Its ecommerce sales increased by 12% in Q2, improving on the 8% growth recorded in Q1.

Builds on test with Google Express and Instacart

The initiative with Shipt is the latest ecommerce partnership for Costco as it continues to test different models. The retailer is also working with Google Express in five cities for same-day delivery, operating out of 15 of its stores. It is also working with the company on a three-day delivery service across the US. Costco has also partnered with Instacart across 26 cities, using 132 of its stores.

Playing catch-up, but moving quickly

This increased level of testing comes after relatively slow progress in the channel. Despite offering an extended range of products online for home delivery for several years, it has not offered the ability to shop for its in-store ranges. Previously the retailer has been concerned with the potential impact on store traffic. However, with an increasing number of retailers now offering ecommerce in the US, and its main competitior, Sam's Club, building a leadership position in the channel, this now appears to be firmly on the agenda. With most of the focus on building a delivery service, there are no plans to offer in-store pickup in the short term.

Looking for more on Costco?

Check out our Costco supply chain snapshot for the latest news, supply chain priorities and your checklist for collaboration.


Costco is the third largest retailer in the US and operates an impressive ‘no-frills’ supply chain that keeps inventory turning over and profits high. Discover the secrets to Costco’s supply chain including its main priorities, network developments and other key statistics.
Check out the key news stories and the emerging trends from retailer's supply chains for the 1st half of 2015 including network improvements, technology enhancements and a couple high-profile company mergers.

In this presentation, we look at the key themes from IGD’s annual Supply Chain Summit and explore supply chain priorities for 2017 and beyond.

Get the latest headlines delivered directly to your inbox every Thursday.

A practical one day workshop for all roles in suppliers, to help develop your understanding of the vital part that supply chains play in underpinning FMCG businesses.