That could be a mistake in an environment where online ordering is taking off, retail analysts say.
Picking up groceries has become popular in the pandemic because shoppers want to limit their time inside stores. It can also be faster for customers than waiting for home delivery, and there are no delivery fees.
In August, 25.5 million households bought groceries online and then picked them up at stores, according to a survey of 1,817 consumers conducted August 24 to August 26 by consulting firm Brick Meets Click. That was up from 10.1 million households in August of 2019, the firm said.
Michael Jackson, 37, in Round Hill, Virginia, is one customer who’s been turning to curbside pickup more often in the pandemic. Although he is a Costco member, Jackson has been ordering up to $125 worth of groceries online for his family of four and driving to pick them up at Walmart and Kroger-owned Harris Teeter during the pandemic.
“It’s convenient. I don’t have to wrangle around kids in the store and tell them not to touch stuff. I can keep them in the car,” he said. “Walmart has dedicated curbside pickup lanes and it works great.”
Jackson doesn’t plan to drop his Costco membership because it doesn’t offer pickup, but “we would go a lot more to Costco” if it gave him the option.
So far, the chain isn’t budging.
“We continue to look at [pickup]. We haven’t decided to do it at this point. We don’t see a lot of members asking for it. And we do offer other alternatives,” Costco chief financial officer Richard Galanti said in an interview with CNN Business.
Jam-packed warehouses and parking lots
Space in its stores is the main issue for Costco. The club doesn’t have much room in its jam-packed warehouses and parking lots to pull off the logistics of pickup. The option requires a staging area inside the store for workers to assemble orders, extra cooler space to keep items fresh, and dedicated parking spots for customers driving in to come grabbing their groceries.
“Their clubs are so busy. It’s a tough thing to do,” said Scott Mushkin, analyst at R5 Capital. “There’s not a lot of backroom space. Stuff goes right to the floor.”
Galanti said Costco would need to reconfigure stores to handle grocery pickups.
“You have to have a place to store the stuff,” he said. “You can’t store it at room temperature. You’ve got to separate it into refrigerated, frozen and dry.”
The company, which operates on razor-thin profit margins, also says it’s too expensive for its business to have employees dedicated to putting together customers’ orders and bringing them out to their cars. “There’s costs associated with it,” Galanti said.
And Costco wants shoppers to come into warehouses, where they often make unexpected purchases while browsing around. Pickup takes away this opportunity for Costco to drive sales.
“We want you to walk the warehouse and see what we have to offer,” Galanti said.
While you can’t pick up your groceries curbside at Costco, you have the option of doing so with certain higher-priced items.
Costco began offering pickup in 2018 on expensive items, such as jewelry and electronics. The company took this step, Galanti said, because people don’t want pricey items shipped to their homes and sitting on their doorsteps.
Sam’s Club’s ‘easy decision’
As Costco holds off on getting into curbside pickup, it’s getting more common at grocery stores. That’s because rivals are seeing success with the option and expanding it.
“In the [pandemic] environment, our members have valued quick and contactless shopping experiences,” Eddie Garcia, senior vice president and chief product officer at Sam’s Club, said in an email. “It was an easy decision for us” to introduce curbside pickup “as a way to provide a further convenience.”