Costco has never embraced quick changes; it moves very carefully.
The warehouse club uses a membership model and it carefully protects its relationship with its members. People pay $60 or $120 a year just to shop in Costco's (COST) -) warehouses, and they do so largely because of the chain's pricing.
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People don't join Costco because it has fancy stores with the latest technology. The chain barely displays its merchandise and instead relies on pricing to drive sales.
The descriptor "warehouse club" isn't symbolic; it's actually what Costco's stores are since products are generally stacked on shelves. Members don't want bells and whistles because they know that what they're not getting means lower costs for the chain, which in turn means cheaper prices for them.
That's why Costco customers have generally not complained about the chain's digital offerings. The chain has a website, but e-commerce has not been a major focus. While rivals like Walmart (WMT) -) and Target steadily grow their digital sales, Costco's actually dropped in the most recent quarter.
"E-commerce sales in the fourth quarter, as I mentioned, decreased 0.6% year over year. While still negative, relatively speaking, our e-commerce showed good improvement," Chief Financial Officer Richard Galanti said during the warehouse club's fourth-quarter-earnings call.
He also noted that Costco has been quietly making some improvements to its website. That's good news for members and potentially bad news for Walmart, Amazon (AMZN) -), and Target.
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Costco quietly improves its digital offering
Costco isn't looking to be a pioneer or a technology leader. Instead, it has the luxury of watching what works for Amazon, Target (TGT) -), Walmart and other retailers and then adding the most effective things they have done.
That's why the warehouse club partnered with Instacart. That deal matches the same-day shipping you can get from Walmart and Target without adding stress (or expense) for Costco.
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Now, Galanti outlined some of the company's digital efforts.
"As I discussed during the last quarter earnings call, when I said that we were in the early innings of our digital mobile transformation efforts, progress is being made. In terms of recent additions and upgrades, we've recently redesigned the account page and the digital membership card," he shared.
Many of the changes are cosmetic, designed to make the site easier to use.
"We also redesigned the header with a larger search bar and expanded selling space," he said. "We've added an app box for messages and advertisements right in the app."
Costco.com adds some key features
While nobody will mistake Costco's website for Amazon's, the warehouse club has added some new features members should like.
"We've recently, a few months ago, opened an optical digital store where you can virtually try on glasses and then order them for pickup, prescription glasses," he said.
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Costco has also enhanced how its digital offerings support the in-store shopping experience.
"There are ongoing improvements in our Costco app, offering in-warehouse shopping tools to our customers such as a digital membership card, managing shopping lists, viewing warehouse savings, seeing the gas prices to the extent there's a gas station there," he said.
That's not all Costco has planned, however, as more changes are coming.
"And soon, you'll be able to search warehouse inventory and scan barcodes from the app," Galanti added.
The existing changes have been met with positive reviews from members, according to the CFO.
"With the improvements made thus far over the past year, our app store rating has gone from a dismal 2.3 stars to currently 4.7 stars. Unique visitors to the site are up 40% year over year, and the Costco app installs are up 46% year over year. So, all in all, progress is being made," he added.
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