Costco has been almost stubborn in how slow it has been to adopt new technology. The company embraced the internet years after rivals like Walmart and Target, and it remains well behind them when it comes to its digital presence.
That was due to a longstanding belief by company leadership that members did not want money to be spent on technology that could instead go into keeping prices low.
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It's not that the warehouse club ignored the internet and advances like guaranteed two-day, then one-day, and now same-day delivery, it just didn't see the need to invest in the required infrastructure. Costco (COST) has been clever in adding features like same-day delivery by partnering with Instacart, and it has slowly improved its website, both in what it sells and how it works.
The chain now has a new CEO, Ron Vachris, and a new CFO Gary Millerchip and while Vachris has been a Costco lifer, he does seem willing to continue to evolve its offerings. That includes making an investment in technology and improving the warehouse's club's fulfillment offerings.
Image source: Patrick T. FALLON / AFP) (Photo by PATRICK T. FALLON/AFP via Getty Images
Costco plans some major changes
Unlike his predecessor, Craig Jelinek, who rarely took part in the company's earnings calls, Vachris was present and involved during Costco's third-quarter call. He answered a question from UBS analyst Michael Lasser:
"Is there any thought given to being more aggressive with some of the evolution on the model, things like buy online, pickup in-store, deploying more technology in the store, or capitalizing on the ever so great amounts of data that Costco has in the form of trying to monetize it through retail media," he asked.
Vachris responded in a way that made it clear that there's new management at the helm which will mean some operational changes.
"I think the answer to that is yes on all those fronts. We are working on all those aspects right now. We're rolling out an expanded buy online, pick up in warehouse," he said, although he did qualify his answer a little bit. "That is always going to be limited in scope based on the volume in our warehouses that we have."
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Vachris explained how he thinks Costco can expand its buy online, pickup in store offerings.
"We can't expand to all categories, but we're expanding as we currently speak in televisions and other electronic items that are there. And so, yeah, we see that as a real opportunity for us," he added.
Costco eyes more technology changes
While Costco has generally downplayed its technology investments, Vachris seemed bullish about the opportunity in front of the chain.
"Technology is going to be one of our key priorities moving forward. How do we improve that member engagement and the relationship we have with them in our brick-and-mortar warehouses, as well as online, and through other aspects such as travel and so forth?" he shared.
The CEO believes that his company, which retains over 90% of its global members routinely, could build an even deeper connection with its customers.
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"Technology we see is a great opportunity to enhance the member relationship with Costco and also drive a lot more business for us as well as we move forward. So, we're going to continually innovate," he added.
Vachris also noted that he sees the changes as evolutionary and not revolutionary.
"I mean, you know, with the management changes, I wouldn't expect major changes as we have a proven strategy now. But as we've done for the past 41 years, we continue to innovate to the needs of our members," he said.
The new CEO also sees an opportunity to use what it knows about its members in better ways.
"And the last on data, absolutely. You know, we see a great opportunity for data. We have expanded our group there. We have a significant program now with retail media and we see some great upside potential," he added.
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