Costco exec says it won't copy Walmart's blockbuster online grocery strategy because 'if somebody wants something in an hour, they're not going to get it from us'
- Costco doesn't plan to have a grocery pickup program like Walmart's any time soon.
- Costco CFO Richard Galanti told analysts on an earnings call Thursday that it will continue to look into developing a click-and-collect grocery system, but that it isn't planning anything any time soon.
- Walmart has experienced rapid growth of its own grocery pickup program, which it is expanding rapidly.
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Costco isn't jumping into the grocery pickup game any time soon.
In response to an earnings-call question from RBC Capital Markets' Scot Ciccarelli about whether Costco had any plans to jump on the pickup trend like Walmart has, CFO Richard Galanti threw cold water on the idea.
He said that the company will continue to observe the space, but it isn't planning a new development any time soon.
"We continue to look at it. We continue to scratch our head about it," Galanti said during the call. "We recognize that they and some others are putting in a lot of financial commitment to doing this. I think what you're going to find is like everything else in life at Costco, over time, we figure out how to do it our way that makes sense for us, that still works."
Costco does do some click-and-collect business, but it's mostly for expensive, small-sized items like electronics, jewelry, or handbags.
Read more: Someone splashed out $400,000 on a diamond ring at Costco
For grocery, Galanti says pickup could cannibalize in-store sales, whereas its current two-day delivery offering and its same-day partnership with Instacart are "additive."
"If somebody wants something in an hour, they're probably not going to get it from us," Galanti said. "We still want to drive you into the warehouse."
Walmart has been one of the biggest proponents of click-and-collect grocery, with plans to expand the service to 3,100 locations by the end of fiscal year 2020, according to a report that Cowen released in March.
There's a good reason for that: customers seem to be loving the service. As many as 13% of Walmart's customers have used it, and it will soon account for 33% of Walmart's online sales, measuring some $7.4 billion in revenue in fiscal year 2020, according to Cowen. It's also bringing in new customers: 40% to 60% of click-and-collect sales are from new Walmart shoppers.