Sunday, June 21, 2015

How Costco Can Thrive In Ecommerce

I love the concept of Costco. Costco is a very specific retailer that have a strong concept, and over the years I stucked to it, and succeed in continuing

I read this very interesting article about online sales for Costco. Costco's Ecommerce activities account for 3%, while most of other brick & mortar retailers are around 7% at the time, targeting soon 10%.

This relatively small share comes from obviously the core concept of Costco: A warehouse with big bulk goods with a membership card to own. Far from a pure player business model. Nevertheless, there is a lot of room for growth for Costco online, there is no doubt about it.

Costco has actually been pretty creative with its online strategy in China, by opening a marketplace on Alibaba whereas they have no warehouses in the country.

But how could Costco make something work online? There is two limits to the two obvious strategy:

  • First it would be to adapt its business model online, with large bulky products with a membership fee. So far it is how it works, and it is unlikely it can earn great market shares this way.
  • To adapt its offer to the other competitors offer. But then, I don't really see the point.

I believe there are two strategies that could work pretty well, and that are some of the strategies that work the most at the time:
  • The flash sales: Costco is great at getting specific deals for a short period of times. That is what they call the "Treasure Hunt". The Internet has experienced tremendous success with such sales, and Costco could benefit from its great pricing to enter this market. 
  • The drive thru: In France, it works great. But by adapting the drive with its concept, with maybe a lot of businesses interested, it could work great. Also, you could get it working with a concept of a subscription concept, in order to ease the order process. Auchan is testing a connected object to order on its online shop, maybe Costco could also have such a service too.

What do you think about it?