Costco moves at a glacial pace. The membership-based company does not promise its customers the latest technology.
Instead, its entire business model revolves around offering the lowest prices possible. That means that management can justify not investing in robots, drones, or other cutting-edge areas.
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That doesn’t mean Costco still takes checks and has manual cash registers. The warehouse club has been able to sit back and watch its competitors. When something becomes table stakes for the industry, Costco can add it in the most efficient way possible.
The chain, for example, offers same-day delivery on some items, but instead of taking on the expense of staffing that service, it offers it in partnership with Instacart. That’s an innovative way to give members something they want — and more importantly something Amazon, Walmart, and Target offer — without raising its expenses.
Basically, Costco wants to put every dollar possible into keeping prices down. That’s something CEO Ron Vachris talked about during his company’s third-quarter earnings call in response to whether Costco would be making price investments to lower costs on select items.
“No, you know, I think that this is part of our everyday DNA. I mean we are competitive on a daily basis. Our buyers are on top of pricing daily, weekly, and we all review them each month,” he said. “And so, we feel very good about where we are today and our runway to continue to be as competitive as we are moving forward.”
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Costco is investing in technology
Vachris only recently became CEO and he was joined in the earnings call by new Costco CFO Gary Millerchip. This was Millerchip’s first time leading the presentation which his predecessor Richard Galanti had conducted since 1985.
UBS Analyst Michael Lasser was one of the first people to ask Millerchip a question.
“Is there any thought given to being more aggressive with some of the evolution on the model, things like buy-online-pickup-in-store, deploying more technology in the store, or capitalizing on the ever so great amounts of data that Costco has,” he asked.
Millerchip was very clear with his answer,
“We are working on all those aspects right now. We’re rolling out an expanded buy-online-pickup-in-warehouse. That is always going to be limited in scope based on the volume in our warehouses that we have,” he said.
There will be limits to what Costco tries to do.
“We can’t expand to all categories, but we’re expanding as we currently speak in televisions and other electronic items that are there. And so, yeah, we see that as a real opportunity for us,” the CFO added.
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Costco takes a member-first approach
Millerchip made it clear that Costco always focuses on its members when its makes investments.
“Technology is going to be one of our key priorities moving forward. How do we improve that member engagement and the relationship we have with them in our brick-and-mortar warehouses, as well as online, and through other aspects such as travel and so forth?” he explained.
For the warehouse club, it’s all about building and improving its relationships with its members.
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“So, technology we see is a great opportunity to enhance the member relationship with Costco and also drive a lot more business for us as well as we move forward. So, we’re going to continually innovate,” he shared.
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Millerchip did make it clear that the company won’t be fixing what isn’t broken.
“I wouldn’t expect major changes as we have a proven strategy now. But as we’ve done for the past 41 years, we continue to innovate to the needs of our members,” he added. “And the last on data, absolutely. You know, we see a great opportunity for data. We have expanded our group there. We have a significant program now with retail media.”
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