Is Costco old news?

Although people have been purchasing some items online for years, the percentage of items purchased online has increased tremendously over the past several years. My building highlights this trend. Several years ago, when people received packages, they would find a special key in the mailbox and would pick up the package from the main office. Now, there is a designated package room–which does not look like it will be big enough for much longer. (Around the holidays, when it was even more full than usual, I joked that I should move out and rent out my unit as storage space for packages). Similarly, my grandma told me that her building had to add a second package room to accommodate all of the online shopping.

I guess I am “old-fashioned” but I prefer to shop in physical stores. For clothes, I want to be able to try things on and compare multiple sizes, With respect to food, I like to see what looks good, especially for produce. (Speaking of which, if you order produce online, do you specify “degree of ripeness?”) And, although I have ordered books online for school, I prefer to roam around bookstores (or libraries) and browse. In addition, it is hard to watch the amount of waste that goes into all of the deliveries (the time, labor, packaging…for the initial delivery and then for the (seemingly endless) returns. Furthermore, I am social and frequently find myself in conversations with people in stores…wouldn’t want to give up those spontaneous chats!  Given these preferences, I have only ordered a few things online–including a delicious cereal that no seems to carry, some clothing when I knew the desired colors and sizes, and computers (including my chromebook Product Review: Acer Chromebook). Although, truth be told, I have started to look online more and more to see if there are things I can order rather than go to less convenient stores.

I have talked with people about what is likely to happen to a lot of stores as online shopping continues to increase. And then recently, I saw this article about the impact of online shopping (mainly among “millennials”) on warehouse stores.

Will millennials kill Costco and Sam’s Club?

You can read the entire article but the main thesis is that younger people are shopping less and less at stores such as Costco in favor of online shopping. Whereas the majority of online shoppers are 25 to 44, baby boomers and seniors are the majority of customers at wholesale clubs. (I haven’t yet researched this, but I wonder about families vs. singles or couples…it seems that online shopping would make a lot more sense for the latter two, whereas families may especially benefit from the large quantities).

According to the article, the advantages of online shopping include:

-No membership fee (or, if they pay to be customers of Amazon Prime for $99/year–and apparently, almost 2/3 of American households are customers!–they do not want to pay an additional membership fee to belong to a warehouse store that provides similar products)

-These days products arrive quickly, reducing the need to pick them up at the store to be sure to have them immediately

-Not having to physically travel to the store (e.g., due to distance; lack of car; not wanting  to take children along)

-Save time (many people shop online while doing other things)

Relatively speaking, Costco has not devoted many resources to e-commerce. Therefore, there are consequences to the increasing affinity for online shopping, especially among millennials.  According to the article, after several years of hiring more employees, Costco started decreasing the number of employees in 2017.

However, Costco remains encouraged about its ability to attract more younger customers. Apparently, over the past few years, the average age of Costco members decreased from over four years older to two years older than the population as a whole (the question is whether this difference is actually meaningful?)

Some steps that Costco (and other warehouse clubs) are taking to attract younger members are:

-increasing the selection of organic produce and meat

-expanding the wine department

-grocery delivery services (side note: a few years ago, I was commenting to my dad about how some of the elderly people in my building like Costco but don’t drive…we were joking that he should start a delivery service from Costco…rotisserie chicken dinner, anyone? Similarly, people have often expressed the wish that Costco would deliver pizza)

Thoughts on this article? Surprised?

Do you think Costco really will struggle? (Sam’s is closing a lot of stores…)

What are your thoughts about in-person vs. online shopping? And, does it differ depending on the type of product?

Have you noticed a change in the demographic shopping at warehouse stores?