Costco Is Finally Testing Curbside Pickup, But Is It Too Little, Too Late?

Costco is waving the white flag and testing curbside pickup at three New Mexico locations after long resisting the idea. But is it too little, too late in an era where consumers are demanding a range of convenient pickup and delivery options?

The warehouse club quietly added curbside pickup as an option at three Albuquerque sites, although the option carries several provisos. For example, customers must order at least $100 of goods, while Costco said on its website that it’s adding a $10 fee because curbside pickup “adds an additional expense to our low-cost business model and limited markup structure.”

Costco also told USA Today that the curbside offering is only available on “a limited basis in one market at this time,” even though rivals Sam’s Club and BJ’s Wholesale Club added curbside pickup nationwide last summer. And whereas Costco is charging a fee, BJ’s service is free to all club members, while Sam’s curbside pickup is free to all members on a temporary basis and permanently free to Plus members.

Costco’s decision to add the service on even a trial basis marks a sharp reversal for the firm, which had previously said it wouldn’t do so.

In September, Chief Financial Officer Richard Galanti said during the company’s fiscal Q4 earnings call that “our view also is there’s some retailers that are doing it because they feel they have to.”

“We don’t have our head in the sand on it. We look at it,” he said. “We have people here that study it and maybe we’ll surprise you one day. But at this juncture, we’re not prepared to do that.”

Galanti reiterated that view during the company’s latest earnings call last month, saying: “We are 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.”

Delivery Often Isn’t Free 

Costco does already offer same-day and second-day delivery through Instacart, although those come with several provisos as well.

For example, same-day deliveries include unspecified fees and require a $35 minimum order. Customers also pay higher prices than they would if they shopped in-store.

The company’s two-day delivery option is a little more forgiving, only charging fees on orders under $75. However, Costco says on its website that customers can’t get perishable food items through two-day delivery, can’t get deliveries on weekends, must order by noon local time and “may” get lower prices by shopping in-store.

Merchants Underestimate The Value Of Curbside And Delivery

Some retailers seem to prefer that customers enter stores for pickup, either because that cuts the merchant’s labor costs by avoiding curbside pickup or free delivery or because they hope consumers will end up buying a few extra items.

However, PYMNTS recent Global Digital Shopping Index found that many merchants underestimate the importance consumers place on curbside pickup and free delivery versus buy online, pickup in store (BOPIS).

“Merchants do not fully appreciate consumers’ appetites for a robust range of digital features, and they overestimate the appeal of more conspicuous features, like buy online, pickup in store (BOPIS),” PYMNTS researchers wrote. “Our research found that 38.3 percent of merchants think that consumers commonly use BOPIS, while just 10 percent of consumers say they use BOPIS often or always.”

By contrast, the study’s survey of U.S. consumers found that interest in curbside pickup “has grown significantly, with 15.5 percent of those who purchase digitally citing it as their preferred way of shopping in July — up from 10.8 percent in March.”

“BOPIS has not gained traction in the same way,” researchers wrote. “The share preferring it dropped slightly during the same period to 13.8 percent. The preference for curbside seems to reinforce an ongoing theme in our research: Many consumers prefer to avoid entering stores.”

As Karen Webster noted in a recent analysis, “Many retailers haven’t mastered the logistics to make the in-store pickup experience anything but friction-filled.”

“Whether it’s having to park the car and go into the store to pick something up or being presented with an in-store pickup option days past the time of the order, the associated hassles are causing consumers to increasingly opt for delivery — and they expect that delivery experience to be free,” she wrote.

Webster said retail’s survivors “will see the future for what it is — consumers who would rather shift the first and last mile of the shopping experience to the retailer, who can, literally, deliver that for them.”