Costco, an iconic membership-only warehouse club, is known for selling products for a lower price through scale. In fact, it is considered the top retailer of organic foods, prime meats, and wine in the world as it has branches in multiple countries like Japan, South Korea, Taiwan, Australia, Mexico, and the United Kingdom.
The company was the first to reach $3 billion in sales within six years. That remarkable growth has made them somewhat of a cult retailer. However, recently, the company delivered negative earnings of 1.7% in the first quarter of 2017, which means the company totally missed the expectations of Wall Street in terms of growth. Analysts have adjusted its earnings to $1.19 since it fell short of what was expected. Aside from the stock prices, the company only logged in a net sales of $27.47 billion last year, which fell short of the expected $28.38 billion.
Reasons for The Shortfall
Costco’s CFO Richard Galanti noted that the shortfall of revenue is attributed to low profits from gas sales and deflationary prices of their goods. The effects of volatile gas prices, as well as the foreign exchange rate, have affected the total revenue of the company. Costco is looking for other solutions to solve its financial setbacks. The company has recently switched from American Express to Citigroup Visa as its co-branded card since the latter credit card company offers lower merchant fees and higher rewards for their members.
Online Store to Boost Its Sales
Aside from changing its co-branding, Costco is also looking into improving its online retail store to improve the shopping experience for its customers. They are developing the marketing, search, return process, and tracking of orders. The store also considers increasing the number of depots by making them closer to customers so that they can deliver faster with less expense on shipping.
The company has also partnered with different delivery service companies like Google Express and Instacart particularly for customers located in the Bay Area so that they can get their purchases immediately.
While some critics say that the giant retail company might be shifting more towards online retail, the company still wants to encourage its consumers to go to their warehouse stores. After all, they became well-known for their warehouse to begin with. The thing is that, warehouse stores will never be replaced by online stores. In fact, Costco is just using the online platform to encourage people to visit its stores as the company noticed that loyal members bought less if they shop online compared to when they go to the actual store.
Inspired by www.seattletimes.com