Expanded partnership with Instacart designed to challenge competitors for grocery customers.
Costco has announced the rollout of a new two-day delivery service called CostcoGrocery for customers in the continental U.S. The service offers delivery of non-perishable items, and waives the $3 delivery fee for orders over $75, according to Geekwire. The announcement was made by Chief Financial Officer Richard Galanti as part of the company’s most recent earnings report, which saw sales of $129 billion, up 9 percent over the same period last year, and a same-store sales increase of 3.8 percent.
Costco has also expanded its partnership with Instacart, offering same-day delivery on a greater selection of both dry and fresh items to a larger audience at 376 stores, according to The Puget Sound Business Journal. Instacart deliveries are available for a $5.99 delivery fee for orders under $35, plus a service fee, and include some markups on certain items. Instacart allows customers to make purchases without a Costco membership.
In the wake of Costco’s announcement, Reuters reported that the company’s shares fell 6 percent. The launch of the delivery services underscores the growing competition in the industry and highlights the lengths to which retailers are going to attract and retain loyal shoppers. Amazon’s recent acquisition of Whole Foods, along with increased efforts by Walmart and Target to entice shoppers with delivery and order options, has increased the competition for customers.
“(Costco‘s) new online delivery initiatives improve its competitive offering and could drive increased engagement with millennials,” Jefferies analyst Daniel Binder told Reuters. "Provided they don't simply cannibalize store sales, the stronger omni-channel effort could prove accretive to sales and EBIT dollars," he added.
“Costco made e-commerce a core part of its earnings call for the first time in memory,” Susquehanna analyst Bill Dreher said. “We believe this shows a new focus on a key engine of growth.”