Costco is (finally) testing sidewalk withdrawal for groceries

Costco is (finally) testing sidewalk withdrawal for groceries

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Costco announced last week that it would begin offering members of the warehouse club in the same day collection area of ​​2,000 grocery items and general merchandise. There is a minimum order of $ 100 to choose a withdrawal and a fee of $ 10 on each order because the model “adds an additional expense to our low-cost business model and limited marking structure,” says the company on its website.

Previously, the company only offered to withdraw expensive items such as jewelry and electronics, saying it was expensive to offer more widely. Some Wall Street analysts questioned whether Costco should expand the service to other goods as the popularity of sidewalk collection exploded.

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

“We are always trying different things. We still scratch our heads with it a little bit. We think we could try it in a low-key market, where there are only a limited number of locations,” he told CNN Business. “And it really is nothing more than a test right now.”

Costco (COST) has exclusive parking spaces for customers arriving to pick up their orders at each of the stores in Albuquerque. Employees prepare online orders and take them to customers’ cars. Customers will make purchases for orders and pay through the Costco website.
The Costco test comes as rivals, as Walmart (WMT), Kroger (KR) and Amazon (AMZN)owned by Whole Foods, also expanded their own sidewalk collection offerings during the pandemic.

Costco’s new collection option has a higher minimum order and fee than other chains. Walmart, Kroger and Whole Foods offer free withdrawal from the market for orders over $ 35.

In recent years, Costco said that collecting groceries on the sidewalk does not make sense to offer, mainly because the club does not have much space in its crowded stores and parking lots to carry out the collection logistics. The option requires a storage area within the store for employees to assemble orders, extra cooler space to keep items fresh, and exclusive parking spaces for customers who are coming to pick up their purchases.

“You need to have a place to store things,” Galanti said in an interview last year. “You cannot store it at room temperature. You have to separate it into chilled, frozen and dry.”

Costco, which operates with minimal profit margins, also says it is very expensive for its businesses to have employees dedicated to gathering customer orders and taking them to their cars.

And Costco wants customers to enter the warehouses, where they tend to make unexpected purchases while sailing. The collection takes away this opportunity for Costco to boost sales.

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

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