🛒 What e-commerce?

Costco will continue focusing on brick-and-mortar business even after e-commerce sales growth

Hey Global Investor, here’s what you need to know before the US markets open.

Market Snapshot 📈

S&P 500 (Thursday Close) 3,722.48 +21.31 (0.58%)

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USDINR (5 PM IST) 73.52 (1 Year +3.56%)

What e-commerce? 🛒

Costco will continue focusing on brick-and-mortar business even after e-commerce sales growth

Background: Costco is the second-largest retailer in the world. Its membership-only warehouse clubs are known for the super cheap food combos, which customers swear by. For instance, its hotdog and drink combo cost $1.50 and the price hasn’t changed since 1985! The company takes pride of places when measuring customer loyalty. Membership renewal rate routinely exceeds 90% in the US and Canada.

With the pandemic raging, Costco’s members turned to its website for shopping. Case in point, the company reported a 91% Y-o-Y growth in online sales during its fiscal Q4.

What Happened? E-commerce growth notwithstanding, Costco will continue focusing on physical stores. That’s quite a contrast compared to retailers across the country who are pulling all stops to cater to the ubiquitous online shopper.

The company, cognizant of the fact that its members are among the most loyal clientele anywhere in the world, isn’t planning to abandon its long-run traditions. Free food samples are a sacrosanct part of the in-store experience and a customer favorite. Along with the $1.50 hotdog + drink, the $4.99 rotisserie chicken isn’t going away anytime soon either.

Add to it, the wholesaler’s status as a one-stop-shop where people can buy a wide variety of essential and discretionary items in a single trip, and the rationale for emphasizing in-store shopping starts making sense. During the pandemic, customers also upgraded to Costco’s executive membership, which costs twice as much but offers 2% cashback on most purchases.

Now, that’s a loyal customer base one wouldn’t want to alienate by shifting business online in a hurry, even if it’s a niche that’s growing.

Market Reaction: On Thursday, Costco closed at $370.29, up 0.23%

Company Snapshot 📈

COST $370.29 +0.85 (+0.23%)

Analyst Rating (34 Analysts) BUY 62%, HOLD 32%, SELL 6%

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