Costco Grows E-Commerce Sales by 91%

Need to Know

• Despite below-forecast earnings, Costco reported huge digital growth, with digital sales growing by 91% over the last quarter, and 102% last month alone.
• Online grocery sales grew by “several hundred percent” according to CFO Richard Galanti.
• Revenue for the period rose 12.5% to $52.28 billion, below analyst estimates of $52.47 billion.
• E-commerce accounted for only 5% of Costco’s overall business in 2019; that figure has now doubled.

Analysis

Big-box bulk retailer Costco reported substantial e-commerce growth for the fourth quarter, with digital sales growing by 91% year-over-year for the period.

Digital sales grew by 102% last month alone, the company reported, despite revenue for the period not quite meeting expectations: the company hit $52.28 billion in revenue for Q4, below the $52.47 billion that was forecast by industry analysts. Meanwhile, e-commerce now accounts for 10% of Costco’s overall business (including services such as Instacart), a figure that has doubled compared to last year.

The company reported a net income of $1.4 billion for the quarter.

Richard Galanti, CFO, said during an earnings call that Costco’s overall marketing strategies are shifting towards a stronger digital focus, which has helped e-commerce numbers for the company grow. “If you go back three or four years ago, I don’t think we had good email addresses for much more than a third of our member base,” he said. “We didn’t focus on that kind of stuff. Today we have well over 60% and growing.”

In addition, Costco has benefitted from consumer spending habits that, during the pandemic, have shifted towards categories such as home improvement and grocery over travel and dining out. Shoppers, Galanti said, “seem to have redirected at least some of those dollars to categories like lawn and garden, furniture and mattresses, exercise equipment, bicycles, housewares, cookware … and the like.”

To that end, Galanti said Costco’s online grocery sales numbers grew by “several hundred percent” in Q4.

Costco’s bricks-and-mortar locations were closed for between 12 and 16 weeks, depending on location, over the course of the summer months. As a result, the company has seen steadily growing online sales figures throughout 2020, with a 28% increase in digital sales in March, pre-pandemic, and a 64.8% increase in June.