business news in context, analysis with attitude

The Puget Sound Business Journal has a story about how Costco CFO Richard Galanti conceded this week in a conference call with stock analysts that the company has been "a little stubborn along the way" when it comes to e-commerce, making changes a "little bit begrudgingly" at times, adding that there are things the company "should have done earlier."

Galanti said, ""We think that we could and should do a lot more online, but we also ... want to get people into the warehouses." And he said that the company is looking to improve the experience and functionality of its website and its distribution logistics as it moves forward it a retail environment that clearly is changing.

Business Insider notes that Galanti also made the point that Costco launched a version of Amazon's new checkout-free store two decades ago. ""In terms of scan-and-go, honestly we've had a version of scan-and-go literally 20 years ago," he said. "A member would walk in, get an RF gun, radio frequency device, walk around, scan their own items, come up to the front, hand that thing to the cashier, and the scanner, and they print out a receipt."

But Galanti seemed to believe that while what Amazon is doing is interesting, it won't be a path that Costco necessarily will follow.

"We want to make sure we understand what all of these people are doing," Galanti said, adding, "We do — and not just from a competitive price shop, and whether it's them or someone else — recognize convenience is a value. But there's also some things that we can and can't do. So I think that we're looking at these things offensively, not defensively at this point."

The comments were made within the context of the announcement of Costco's first quarter results - same store sales were up one percent ... profit was up to $545 million, from $480 million ... and total revenue rose 3.2% to $28.1 billion, while membership fees climbed 6.2% to $630 million. And online sales were up eight percent.
KC's View:
I think that Galanti has it absolutely right - Costco has been a little resistant to adapting completely to the growth of online, but it shouldn't necessarily try to replicate what Amazon does.

I've made the point here before that a number of the purchases that I used to make at Costco have migrated over to my Amazon basket, and I've heard the same thing from a number of MNB readers. I think if Costco wants to get those sales back, which will be difficult because so many of them are on my Subscribe-and-Save plan, it has to figure out how to differentiate itself from Amazon in a compelling way, as opposed to imitating it.