Costco is moving at a slow pace. The membership-based company doesn't promise its customers the latest technology.
Instead, its entire business model revolves around offering the lowest possible prices, meaning management can justify not investing in robots, drones or other cutting-edge areas.
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That doesn't mean that Costco Wholesale (COST) It still accepts checks and has manual cash registers. The warehouse club has been able to sit back and watch its competitors. When something becomes a sure bet for the industry, Costco can incorporate it as efficiently as possible.
The chain, for example, offers same-day delivery on some items, but rather than go to the expense of hiring staff for that service, it offers it in partnership with Instacart. It’s an innovative way to offer members something they want — and, more importantly, something amazon wants. (amazon.com) Walmart (WMT) and objective (TGT) offer —without increasing their expenses.
Basically, Costco wants to spend as much money as possible on keeping prices low. That's something CEO Ron Vachris talked about during his company's press conference. Third Quarter Earnings Conference Call in response to whether Costco would be making price investments to reduce costs on select items.
“No, I think this is part of our everyday DNA. I mean we are competitive on a daily basis. Our buyers are aware of the prices on a daily, weekly, and we all review them on a monthly basis,” he said. “So we are very pleased with where we are now and with our potential to remain as competitive as we are in the future.”
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Costco is investing in technology
Vachris recently became CEO and was joined on the earnings call by Costco's new CFO, Gary Millerchip. This was the first time Millerchip led the presentation that his predecessor, Richard Galanti, had conducted since 1985.
UBS analyst Michael Lasser was one of the first people to ask Millerchip a question.
“Has there been any thought about being more aggressive with some evolution of the model, things like buying online and picking up in-store, implementing more technology in the store or leveraging the massive amounts of data that Costco has?” he asked.
Millerchip was very clear with his answer:
“We're working on all of those aspects right now. We're implementing an expansion of the buy online, pick up in-store option. That will always have a limited scope based on the volume we have in our warehouses,” he said.
There will be limits to what Costco tries to do.
“We can't expand into every category, but we are expanding right now into TVs and other electronics that are out there. And so, yes, we see that as a real opportunity for us,” the CFO added.
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Costco takes a member-first approach
Millerchip made it clear that Costco always focuses on its members when making investments.
“technology will be one of our key priorities going forward. How can we improve member engagement and the relationship we have with our members in our physical stores, as well as online and through other aspects like travel and so on?” he explained.
For the warehouse club, it's all about building and improving its relationships with its members.
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“We see technology as a huge opportunity to enhance our members' relationship with Costco and also generate a lot more business for us as we move forward. So we're going to continue to innovate,” he shared.
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Millerchip made it clear that the company won't fix what isn't broken.
“I wouldn't expect any major changes, as we now have a proven strategy. But, as we have done for the past 41 years, we continue to innovate to meet the needs of our members,” he added. “And finally, on data, certainly. We see a huge opportunity for data. We've expanded our group in that area. We now have a significant programme with retail media.”
Investors like what they see at Costco. At $817.60, the stock is up 24.4% this year, even after retreating 9% from its 52-week high of $896.67 on July 9.
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