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Ecommerce

Costco: In-store sales rise due to membership strategy

Friday 9 March 2018 | 12:31 PM CET

Costco in-store sales have increased by 8.4% in the quarter ended on February 18, with shoppers buying memberships and flocking to its warehouse stores rather than just shopping online.

Costco's online sales leapt 28.5%. The company has been trying to hold its ground against Amazon, which made a significant push into the grocery space when it bought Whole Foods Market for USD 13.7 billion in 2017.

Costco, the third-largest grocer in the US, said net income rose to USD 701 million in the most recent quarter, up from USD 515 million during the same period in2017. Costco said it saw a USD 74 million tax benefit due to the new federal corporate tax cut.

Costco launched two new delivery choices in October 2017 to make sure it could offer the ease to its customers that have attracted so many shoppers to Amazon and it has enabled shoppers to purchase computers, jewellery and some other products online and then pick them up at a store.

Many traditional retailers have struggled to boost revenue, sales and profits as an increasing number of shoppers turn to Amazon and other primarily e-commerce-based sellers to buy what they need.

However, Costco has been kept afloat because of its membership model, which brings in fees and guarantees a base of shoppers in the tens of millions.

Renewal rates for members rose to 91% in the last quarter, a slight, 1% bump, over the prior three-month period.

Membership fee revenue jumped 12.6% to USD 716 million from USD 636 million during the most recent three-month period before March 2018. Of that increase, USD 37 million was due to increased fees implemented in 2017 in the US and Canada, as well as fee upticks overseas in 2016.

In June, Costco raised its annual fees for roughly 35 million members in the US and Canada. The new charges rose from USD 50 to USD 60 for individuals, companies and business add-on members.

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