The web still represents a small portion of overall revenue for warehouse retail chain Costco Wholesale Corp.—around 3%—but e-commerce is growing at nearly 20% and is more profitable than its stores, company executives revealed last week in a fiscal year-end earnings call.
Costco executives also shed additional light on its testing this past year of next-day delivery of online orders as part of the Google Shopping Express program. The service, which Costco is testing with consumers in the San Francisco, Los Angeles and New York metropolitan areas, is driving up member spending and also increasing new member sign-ups, says chief financial officer Richard Galanti. The company said it might expand the program to more areas in the future. “We recognize, we’re not going to be the guy that drops off Fruity Pebbles cereal and a quart of milk before your kid wakes up in the morning for breakfast, if you ordered it before 10 p.m. the night before,” Galanti told analysts on the call. “In this case, it’s kind of hopefully a win-win, not only for Google Shopping Express but for us. You can’t get Costco items through Google Express unless you are a Costco member. And we have seen incremental sign-ups because of that.”
Galanti also added that the company expects to launch e-commerce operations in at least one, and probably two, new countries by the end of calendar 2015, though he didn’t say which ones. Costco currently sells online in the U.S., Canada, United Kingdom and Mexico.
Galanti told analysts its e-commerce channel was “quite a bit more profitable” than the rest of its business, though he did not disclose profit margins for the web or stores.
For the fiscal year ended Oct. 5, 2014, Costco reported:
- Online sales grew approximately 18% year-over-year to nearly $3 billion, though the retailer did not disclose exact dollar amounts. A company spokesperson says online sales to businesses through its web site, or what it calls its Business Center sales, would add roughly another $400 million to its total 2014 online revenue. He would not disclose a comparable figure for 2013.
- Net sales, or store and web sales combined, totaled $110.21 billion, a 7.1% increase compared with $102.87 billion in fiscal 2013.
- Membership fees reached $2.43 billion, up 6.1% from $2.29 billion.
- Comparable-store sales increased 4% for the year—3% at international locations and 5% in the U.S. Costco includes e-commerce sites running for more than a year in its comparable-store sales figures.
- Net income of $2.06 billion, a 1.5% increase compared to $2.03 billion.
For its fiscal fourth quarter, Costco, No. 14 in the Internet Retailer Top 500 Guide, also reported:
- Web sales grew approximately 18% compared with the fourth quarter of fiscal 2013, though the merchant did not disclose dollar amounts.
- Net sales reached $34.76 billion, a 9.4% increase from $31.77 billion.
- Membership fees of $768 million, up 7.3% from $716 million.
- Comparable-store sales grew 4% companywide—2% at international stores and 5% in the U.S.