From Bulk Bargains to Inventory Insight: How Costco Wins Hearts and Wallets

Costco has built its reputation on value-based bulk deals, and it’s an offering that keeps shoppers flocking to its stores.

This deep-seated sentiment is confirmed by the retailer’s confidence, as evidenced during its recent fourth-quarter earnings call on Tuesday (Sept 26). Costco announced that its renewal rates in the U.S. and Canada have reached 92.7%.

With that, the warehouse retailer continues to find motivation to give shoppers more reasons to come back beginning with ongoing investments in its mobile app.

Going back to 2019, Costco debuted a small but mighty mobile app feature — its digital membership card. At the time, it was one of the retailer’s latest moves to modernize its mobile capabilities.

Fast forward to today, and Costco is continuing to enhance its mobile app offerings. On Tuesday, the retailer announced its intention to provide a suite of enhanced tools for warehouse shoppers. These tools encompass a digital membership card, the capability to manage shopping lists, access to warehouse savings, and real-time gas prices at their gas stations.

Costco also revealed plans to introduce a feature that would enable customers to conveniently search for warehouse inventory by scanning barcodes using the app.

“With the improvements made thus far over the past year our app store rating has gone from abysmal, 2.3 stars, to currently 4.7 stars. Unique visitors are up 40% year over year. And the Costco app installs are up 46% year over year, and so all in all progress is being made,” said Richard A. Galanti, executive vice president and chief financial officer at Costco.

However, for customers who read that they would soon be able to scan barcodes and thought “scan & go,” think again. According to Galanti, “I don’t think we’re prepared for scan and go yet. We’re just going to scan but they can’t go.”

With that in mind, Galanti notes that for Costco, the primary focus at the end of the day is ensuring that merchandise is promptly stocked on their shelves and that each item is assigned a membership number. This process is a critical precursor before making the products available online, enabling members to conveniently check the local store’s inventory, as having this level of transparency about in-store availability is seen as a significant advantage for Costco.

Additionally, part of their scanning process aims to provide customers with more comprehensive product information, enhancing the shopping experience and ensuring that members can make informed choices about the items they wish to purchase.

Continuing the theme of increased transparency regarding product items, Galanti said that although a few departments might need some extra inventory fine-tuning, the overall outlook remains optimistic.

Throughout the fiscal year, the company’s inventory remains just below $16.7 billion, while payables extend to $17.5 billion, resulting in a ratio exceeding 100%. This represents a shift from the customary range, from 90% to 95%. Despite occasional fluctuations, Galanti has a strong sense of confidence in the present state of inventory levels.

Regarding the supply chain, Galanti noted that as they approach the anniversary of a past period of vulnerability, there is an expectation that this will boost sales performance, particularly for high-value items.

In the realm of eCommerce, Galanti said Costco has consistently excelled, with a standout being appliance sales. It has also succeeded in highlighting the value of its offerings online, showing not only the item’s price but also delivery and warranties, which sets them apart from competitors.

Costco by the Numbers

In the 17-week fourth quarter, Costco reported net sales were $77.43 billion, up 9.4% from the previous year. For the full fiscal year, net sales were $237.71 billion, a 6.7% increase.

Fourth-quarter net income was $2.160 billion, compared to $1.868 billion in the previous year. For the fiscal year, net income was $6.292 billion, compared to $5.844 billion in the prior year.

Costco operates 861 warehouses globally with a strong eCommerce presence.