Costco’s secret weapon for reducing delivery times

On a recent earnings Q&A Thursday, Costco Chief Financial Officer Richard Galanti touched on several topics, including the big box retailer’s speedy delivery strategy.

When it comes to Chinese merchandise, Costco has been able to keep delivery times to within one hour. Galanti said in certain parts of the U.S., shoppers have come to expect one-hour delivery, but it’s still different overseas.

“Over there [in China] it’s a third party that’s doing that, like Instacart or these other ventures here.”

Costco Logistics has helped the retailer reduce delivery times. There, shoppers can choose two- or three-hour windows in some product categories.

“We’re constantly getting better,” said Galanti.

The retiring CFO also mentioned that Costco could be making warehouse inventory available online and it could be ready in the next few months.

“At the end of the day if you look at something to buy online and we have it in at the location or two in the ZIP code near you where you would shop physically we will let you know that you can buy it there,” said Galanti.

More retail media 

Will Costco be doing more in terms of retail media? Galanti wasn’t definitive when he was asked about it during the company’s second quarter earnings call, but he did hint that more might be done. Over the last year Costco has brought in people who can help in the retail media arena.

“We know there’s an opportunity there to do more than we’ve done in the past,” said Galanti. “It’s a point of focus. We know that there’s money out there. Rest assured, whatever it is, we are going to use it.”

The membership fee conundrum

Over the past several months Costco has said it is not a matter of if membership fees will be raised, but a matter of when. Galanti was asked again if a membership fee increase was on the horizon, and he again refused to provide a timeline.

“We like the fact we are performing well,” he said. “We like the fact that almost all metrics are going in the right direction in our business right now. We’ve got plenty of runway left.

“Not trying to be cute about it, but [the timing of the fee increase] is not some big analytical formula. It’s simply a measure of we will at some point I’m sure do it.”

Room for expansion

During the earnings call, Galanti said Costco would open a total of 28 new units both in the U.S. and abroad in 2024.

He added that the goal is to open 25 or more stores annually over the next couple of years, followed by up to 28 or more a year.

“If you had asked us five years ago how many we would be putting in the U.S. this year we would not have said 20 plus,” he said.