Costco under way with limited test of grocery curbside pickup

After not having previously offered a click-and-collect option, Costco Wholesale has begun piloting curbside pickup for groceries at several warehouse clubs in New Mexico.

Issaquah, Wash.-based Costco hasn’t officially announced the test, but a page on the retailer’s website said same-day Costco Curbside Pickup powered by Instacart is now available to members at three clubs in Albuquerque, N.M. Users can choose from a selection of about 2,000 grocery items, including fresh food and some nonfood products.

To access Costco Curbside Pickup, members go to Costco.com and click on “Grocery” and select “Same-Day Delivery” and then “Pickup,” after which they choose the club pickup location and begin shopping. Costco noted on the website that the online shopping cart for pickup, which uses Instacart technology, isn’t part of the Costco.com virtual cart and requires separate checkout.

Pickup times are offered in one-hour windows, and Costco has reserved parking spaces at each club providing curbside service. Costco will text members with status updates on their orders and, when the groceries are ready for pickup, they will receive a message on where to park and how to check-in. Costco associates prepare the orders and bring them to members’ vehicles.

Related:Costco’s sales growth slows in December but beats Wall Street expectations

Costco Curbside Pickup service offers a selection of about 2,000 grocery items, including fresh food and some nonfood products.

Costco said on the website that pickup carries a $10 fee per order and a $100 minimum purchase. Product prices in curbside service are the same as in-club pricing when the order is placed, according to the company. Members can get 2% cash back if they use the Costco Anywhere Visa Card by Citi for their pickup purchase. Curbside transactions also are eligible for the annual 2% reward in Costco’s Executive Membership plan. 

Costco first partnered with Instacart on same-day delivery in 2016 and now offers that service via all of its clubs. However, the retailer has until now held off on store pickup, save for some big-ticket items less amenable to home delivery. 

Regarding the implementation of pickup, the company has cited such concerns as taking up space inside clubs for assembling and holding orders, reserving areas in its busy parking lots for curbside service, impacting in-club traffic and potential impulse purchases, and cost.

Chief Financial Officer Richard Galanti specifically mentioned the cost issue in a conference call last month on Costco's fiscal 2021 first-quarter results when analysts asked if the company was rethinking its stance on offering “buy online, pickup at store” service.

“We’re not rethinking it. We continue to look at it and scratch our heads a little bit. But at this juncture, we don’t have any current plan to do so,” Galanti said in response to a question from Wells Fargo Securities analyst Ed Kelly.

Related:Costco net sales up nearly 17% in first fiscal quarter

In the call, Galanti told BMO Capital Markets analyst Kelly Bania that Costco is still reckoning the cost equation for pickup.

“One of the challenges right now is a lot of the ‘buy online and pick up in store’ traditional retail promotions are the same price as what you come in [to the club] and buy it for. So somebody’s paying for picking it and storing it and waiting for you to pick it up,” Galanti explained. “I think that will shake out over time — somebody has to pay for it, either the company or the customer. We’re looking at all those things. But we haven’t made any decisions to go forth with it.”

Usage of in-store and curbside pickup and home delivery has surged as more Americans seek contactless grocery shopping options amid the COVID-19 pandemic. But consumers have leaned toward pickup for fulfillment, with Costco competitors such as Sam’s Club, BJ’s Wholesale Club, Walmart and Target reporting strong results for the service. 

According to the latest U.S. Online & In-Store Grocery Shopping Study from Retail Feedback Group, released in December, 51% of online grocery customers used pickup, up from 47% in 2019. Forty-nine percent of those shoppers used delivery service, down from 53% in 2019. 

Overall, the U.S. online grocery market tallied sales of $8.1 billion in November, up 3.6% since August, according to the latest Brick Meets Click/Mercatus Grocery Shopping Survey. The study found that U.S. households placed 60.1 million U.S. households placed an average 2.8 online grocery orders during the month, with delivery and pickup capturing 73% of sales. Active delivery and pickup shoppers reported a record-high repeat intent rate of 83%, indicating high satisfaction with those services, Brick Meets Click said.