Retail

Costco Struggles To Keep Up With Coronavirus Demand

Costco Struggles To Match Coronavirus Demand

As customers visit Costco to stock their pantries amid the coronavirus outbreak, CFO Richard Galanti said on an earnings call last week that the retailer’s procurement team is "working, in some cases, around the clock to procure supplies for both existing suppliers and from other sources where possible" to continue to meet demand, per a report from Retail Dive.

The heightened demand – paired with issues securing inventory from China suppliers – has reportedly caused the retailer to run out of items on a daily basis. Manufacturing facilities have also reduced their production, which has exacerbated the stocking challenges. "But again," said Galati, "it's improving and this still has a little ways to go."

A portion of the retailer’s plan for contending with knotted supply lines has been to utilize air freight. The cost for air freight has risen recently due to a slowdown in Chinese ocean ports, but there are reportedly indications that those operations are starting to pick back up.

Costco is also handling its inventory by putting limits on the quantities of merchandise that a shopper can buy. Galanti also said the retailer is “shifting SKUs to alternative items and categories.”

Other major retailers, such as Home Depot and Kroger, are also managing inventory levels by capping the number of units customers can purchase of certain items. Prime Now and Amazon Fresh have warned of potential delivery delays in light of the spike in demand.

Earlier this month, news surfaced that UPS and FedEx cautioned that the coronavirus might affect the shipment of products and possibly affect their first-quarter results. At the time, FedEx said it would continue flying in and out of impacted countries, but travel limitations could hold up some shipments. And UPS Chief Financial Officer Brian Newman said at a conference that “the business obviously slowed,” per news earlier this month.

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