Costco Winning Members Over With Cookies and Gold
Membership growth continues for Costco Wholesale Corp. During its second quarter, the warehouse club chain reported a membership fee income of $1.111 billion, up $84 million, an increase of 8.2% year over year.
“We ended the second quarter with 73.4 million paid household members, up 7.8% versus last year, and 132.0 million cardholders, up 7.3%, with continuing growth throughout the quarters,” said EVP and CFO Richard Galanti during the company's Q2 earnings call. (Galanti will soon step down from his position to serve in an advisory role through January 2025. Former Kroger exec Gary Millerchip will assume Galanti’s role on March 15.)
Shopping frequency for Costco increased 5.3% worldwide and 4.3% in the United States. One of the drivers of Costco’s success is its unique e-commerce offering. E-commerce sales over the past few months have had a strong showing, with sales increasing 18.4% in Q2.
“In terms of e-commerce sales over the past few months, we believe we've done a much better job explaining to our members the significant value propositions we offer compared to traditional competitors in several big-ticket categories,” said Galanti.
One of the bigger-ticket – and most popular – categories is that of gold bars. The warehouse club giant started selling 1-ounce gold PAMP Suisse Lady Fortuna Veriscan bars to its members in September 2023. The gold bars were listed at a price of $2,069.99 an ounce on Dec. 15 on the Costco website. The offering has been so popular that the bars typically sell out within a few hours after they’re uploaded to the website. Customers are limited to two bars per membership.
The retailer is now expanding its precious-metals business by selling packs of 1-ounce silver coins online, priced at $625 for 25 coins.
Meanwhile, progress continues to be made in e-commerce. In February, Costco rolled out a new native mobile application homepage on iOS. The native homepage now loads in less than two seconds, compared with eight seconds previously.
“Needless to say, that's important when about 60% of our e-comm business, both visitors and orders, are now done via our mobile app and browser,” said Galanti. “And ... we rolled out Apple Pay to all members online, both web and mobile, on Feb. 28. App downloads during the quarter were up 2.8 million and currently total around 33 million.”
Furthermore, Costco Logistics saw record-breaking deliveries in Q2, completing more than 1 million deliveries, up 28% versus Q2 a year ago.
Members are also attracted to Costco’s in-store model, specifically its food courts. Costco’s food court was among the top performers in the recent quarter. To sustain this momentum, Costco is shaking up its menu. It recently replaced the churro with a freshly baked 5.5-ounce chocolate chip cookie for $2.49. While discontinuing the churro created a stir, the new giant cookie has received a lot of positive feedback from social media influencers. A turkey sandwich is also being rolled out this week for $6.99.
In addition, Costco is taking a page from its Costco locations in Asia by recently opening its first fully operated sushi offering in Washington state, located across the street from its Issaquah headquarters. It has plans to open two more sushi operations in the very near future.
Galanti explained this offering has been available for many years throughout Asia. “The sushi program has proven to be a category where we can be successful in both quality and price, and we're looking forward to seeing more of that in the future,” he said.
[RELATED: Poke on the Menu at More Walmart Stores]
Something that’s not changing at the Costco food court is its iconic $1.50 hot-dog-and-soda combo. The popular menu item has remained at $1.50 since the 1980s.
For the full year ’24, Costco estimates 30 total club openings, including two relocations. During Q2, it opened four new warehouses, including three new locations in the United States. Two of them were Costco Business Centers. For the remainder of Q3 and and for Q4, Costco plans on opening a total of 15 new locations: 11 in the United States, two in Japan and one each in Korea and China.
Issaquah, Wash.-based Costco currently operates more than 870 warehouses, including 600-plus in the United States and Puerto Rico and 100-plus in Canada, and is No. 3 on The PG 100, Progressive Grocer’s 2023 list of the top food and consumables retailers in North America. PG also named Costco among its Retailers of the Century.
