Costco tops Amazon as the new king of internet retail

Amazon’s reign is officially over – for at least one year, anyway.

After leading customer satisfaction in the e-commerce space since 2010, Amazon dropped 4 percent to an ACSI score of 82 (out of 100), according to our latest Retail and Consumer Shipping Report. The new leader? Costco.

In its first year in the internet retail category, Costco posted an ACSI score of 83, matching its in-store mark for both the department/discount and supermarket categories.

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Costco wasn’t the only newcomer to score high in its first year in the internet retail category. Among the 21 new companies, Etsy, Kohl’s, Nike, and Nordstrom each debuted with an ACSI score of 81. Apple, HP Store, Macy’s, Target, and Wayfair also made strong impressions, scoring 80 a piece.

The expansion of this category makes Costco’s top-ranking performance all the more impressive. Costco has historically succeeded in categories linked to the in-store experience – especially when you consider the popularity of its pizza – so when you factor in the e-commerce experience, the results seem almost inevitable.

Costco’s recipe for success

Membership-based warehouse stores were the real winners in the retail trade sector in 2018, and none shined quite like Costco. According to CNN Business, Costco’s strategy to accomplish this was to “perfect what’s been working for four decades.”

Brick-and-mortar stores are the company’s bread and butter; that’s unlikely to change. Customers enjoy the experience of shopping at Costco, they remain unwaveringly loyal – 90 percent of Costco members renew their subscriptions – and perhaps most importantly, they appreciate the value they receive.

Costco offers cheaper products without sacrificing the quality. Look no further than its signature Kirkland brand, which offers less expensive alternatives and is considered by analysts to be “one of the most popular white labels across retail.”

How does all of this tie into Costco’s success in online retail? Perhaps it’s best to look at why Costco decided to go online in the first place.

What’s driving Costco online?

Costco had been reluctant to venture into online retail for two reasons. First, its winning formula has always been based around giving customers a great in-person experience, and second, it’s pricey to ship bulk items.

Costco may have been dubbed “Amazon-proof,” but there’s no guarantee the label lasts forever. One way Costco has staved off the competition is by cornering the food market. Per CNN, 93 percent of Costco members turn to the warehouse store for their groceries. But for how long?

Costco can’t afford to get complacent when other online retailers want a piece of the pie. The only way to defend itself against would-be assailants is to embrace internet retail.

And it has. Costco now offers same-day fresh delivery through Instacart and also launched CostcoGrocery.

With CostcoGrocery, members receive two-day delivery when they order “shelf-stable” products on the website. They also get free shipping if the purchase exceeds $75, according to The Wall Street Journal.

How Costco is reshaping the e-commerce and retail landscape

Costco’s biggest selling point is its in-store experience. It’s made a killing in that respect. But it also recognizes the importance of creating a presence in the e-commerce space.

Costco offers 10,000 products on its website and app. It lets you buy expensive items online, including furniture not previously sold in stores, and gives you the option to pick up your online purchases in the store. The result of Costco’s expanded online offerings has been a 21 percent increase in online sales since July 2018.

In a world where most customers are choosing to shop online, Costco has managed to keep its customers coming back to the warehouse. And yet, that hasn’t prevented it from dabbling in the e-commerce space. From the looks of it, Costco is clearly succeeding there as well.

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