In the world of retail, convenience is king. And in recent years, no service has exploded in popularity and become more synonymous with convenience than curbside pickup. This click-and-collect model, which allows customers to place an order online and have it brought out to their vehicle at the store, has transformed the way many people shop.
The COVID-19 pandemic undoubtedly accelerated the adoption of curbside pickup, but the service was already on track to hit the mainstream prior to 2020. Consider the following data points:
- Between 2018 and 2019, adoption of click-and-collect services like curbside surged by 60% to 66%, per eMarketer.
- Even before the pandemic, 68% of U.S. consumers said they would use curbside if it were available to them, per a 2019 survey by Offers.com.
- Curbside pickup accounted for 40% of all digital sales at the top 50 store-based retailers in 2021, up from 28% in 2020, per Insider Intelligence.
Given the undeniable demand and widespread availability of curbside pickup at major retailers today, you may be wondering: does Costco, one of the largest and most popular membership-based wholesale clubs, offer this coveted service?
The short answer is no. As convenient and ubiquitous as curbside pickup has become, it‘s notably absent from Costco‘s offerings as of 2023. Here‘s a closer look at why that is and what alternatives you have for online ordering and pickup at Costco.
Why Costco Doesn‘t Do Curbside Pickup
On the surface, Costco seems a prime candidate to provide curbside service. The retailer is known for its wide selection of groceries and household essentials sold in bulk, the very items many consumers look to stock up on via hassle-free curbside pickup. What‘s more, many of Costco‘s direct competitors in the wholesale space, like BJ‘s Wholesale and Sam‘s Club, have begun offering curbside in recent years.
So what‘s behind Costco‘s resistance to curbside pickup? The retailer‘s rationale for eschewing the service is multipronged and goes to the heart of its business model:
1. Costco‘s treasure hunt shopping experience
Costco‘s stores are strategically designed to encourage exploration and incremental purchases among shoppers. The so-called "treasure hunt" experience of wandering the warehouse aisles and discovering unexpected finds is core to Costco‘s DNA.
"We want to catch our members‘ eyes with exciting merchandise offerings," Costco‘s CFO Richard Galanti said on a 2022 earnings call. "The sight lines and movement of what‘s in and out of the warehouse adds to the treasure hunt mindset."
By contrast, curbside pickup is inherently more transactional, with customers typically sticking to their shopping list and forgoing the opportunity to make impulse buys in-store. For Costco, whose profitability depends on enticing shoppers to toss a few extra items in their oversized carts, curbside would eat into those lucrative unplanned purchases.
2. Limited SKU selection
Whereas a typical grocery store might carry upwards of 50,000 unique products (or SKUs), Costco intentionally limits its assortment to a carefully curated selection of around 4,000 items. This narrower inventory allows Costco to drive larger volumes, secure steeper discounts, and turn over products faster.
However, it also means Costco doesn‘t have quite the same impetus to invest in making its full catalog available for curbside pickup compared to retailers who carry a much broader array of items and want to extend as much of that assortment to online shoppers as possible.
3. Razor-thin margins
Costco is notorious for its rock-bottom prices and slim profit margins on the goods it sells. The company makes the bulk of its income from annual membership fees and prioritizes value above all else. As a result, Costco‘s net margins typically hover in the 2-3% range, well below the retail industry average.
With such thin margins, Costco has less wiggle room to absorb the added labor costs associated with offering curbside pickup, which requires dedicated staff to pick and pack orders and bring them out to customers‘ vehicles. Competitors with higher markups are better able to offset these incremental expenses.
Industry consultant and former Sears CEO Mark Cohen put it bluntly: "Curbside pickup is an expensive model to maintain and Costco doesn‘t have a profit structure that supports that kind of investment."
4. Customer shopping preferences
Costco has cultivated a famously loyal membership base, with renewal rates consistently topping 90% in the U.S. and Canada. For many Costco devotees, regularly visiting the warehouse is a cherished ritual and a key part of the value they derive from their $60+ annual membership.
While the pandemic certainly spurred more consumers to embrace online grocery shopping and curbside pickup, Costco‘s die-hard customers have largely stuck to their in-store shopping habits. In a 2022 survey by Coresight Research, just 19.1% of Costco members reported using curbside and delivery, compared to 40.7% for Target and 31.7% for Walmart.
Costco‘s management has insinuated that expanding curbside pickup is simply not a pressing priority given the preferences of its core customer base. "It‘s not that we don‘t think it‘s appropriate for some of our constituency, it‘s just that in the scheme of things, we think that we‘ve got a few other things that make more sense for us," Galanti stated on an earnings call.
A Closer Look at Costco‘s Brief Curbside Pickup Experiment
It‘s worth noting that Costco did dip its toes into the curbside waters, albeit very briefly. In late 2021, the retailer quietly began testing curbside service at three warehouses in Albuquerque, New Mexico.
To use the service, members could place an order via Costco‘s website or app, select a one-hour pickup window, and pull into designated spots in the parking lot where employees would bring their items out and load them into their vehicle.
However, Costco quickly scrapped the curbside pilot in early 2022, with Galanti declaring that the trial run had simply "not worked out." He suggested the program wasn‘t seeing sufficient uptake among shoppers to justify continuing it.
"We tried it, we thought we‘d give it a shot, and our members in those markets that we offered it to just didn‘t respond to it," Galanti said on an investor call. "It‘s probably best for us just to not offer it, and continue to focus on other things."
How Costco Compares to Competitors for Curbside and Online Ordering
While curbside has become table stakes for most major retailers post-pandemic, adoption still varies considerably within the wholesale club category. Here‘s how Costco stacks up against its chief rivals:
| Retailer | Offers Curbside Pickup? | Curbside Launch Date | Curbside Locations | Pickup Fee |
|---|---|---|---|---|
| Costco | No | N/A | 0 | N/A |
| Sam‘s Club | Yes | June 2020 | 600+ | Free |
| BJ‘s Wholesale | Yes | August 2020 | 225+ | Free |
As the chart illustrates, Costco is currently the lone holdout among the big three warehouse clubs when it comes to curbside pickup. Sam‘s Club and BJ‘s Wholesale both moved quickly to roll out curbside in the early months of the pandemic and now offer the service for free at the majority of their locations.
It‘s not just other wholesale clubs that are outpacing Costco on the curbside front either. Curbside has become a standard amenity at most big-box retailers and grocery chains:
- As of Q1 2023, Walmart offered free curbside pickup at over 4,700 locations and is on track to expand to 5,500+ stores by year-end.
- Target has brought free Drive Up curbside service to over 1,900 of its stores in recent years.
- 60% of Kroger‘s nearly 2,800 stores now have free curbside pickup available.
Costco‘s E-Commerce Growth and Instacart Partnership
Just because Costco hasn‘t embraced curbside doesn‘t mean the retailer is ignoring e-commerce altogether. In fact, Costco‘s online sales have surged in recent years, topping $19 billion in 2022, up from just $6.5 billion in 2019.
A big catalyst for that digital growth has been Costco‘s partnership with Instacart. Since 2016, the retailer has offered same-day delivery powered by the leading grocery delivery platform. Costco shoppers can place an order via Instacart‘s website or app, select a delivery window, and have their items brought to their door in as little as an hour by an Instacart shopper.
In 2021, Costco expanded its Instacart tie-up to also include store pickup, whereby customers can order their items on Instacart for pickup rather than delivery. This essentially functions as Costco‘s de facto curbside offering, although the orders are shopped and brought out by Instacart contractors rather than Costco employees.
Leveraging Instacart for curbside pickup orders rather than building out its own in-house operation allows Costco to meet demand for the service in a more asset-light way. "With the Instacart [pickup] relationship, we‘re able to do it without having a lot of additional labor attached to it," Galanti told investors.
Of course, utilizing a third-party service like Instacart does come with some trade-offs for Costco customers. While pickup is typically cheaper than Instacart delivery (with a reduced service fee of 1.9% versus 5%), there are still extra costs involved compared to shopping in-warehouse. Pickup orders also have a $10 minimum subtotal and are subject to potential markup on individual items.
Tips for Using Costco‘s Existing Pickup Options
While a true curbside pickup service fulfilled by Costco employees remains elusive, here are some ways to make the most of the retailer‘s current slate of online ordering and pickup options:
-
Opt for in-warehouse pickup on big-ticket items: For select high-value products like electronics and jewelry, Costco does offer the ability to order online and pick up your purchase at the store pickup counter, typically located near the returns desk. This can be a good choice if you know exactly what big-ticket item you want and prefer the convenience of purchasing ahead.
-
Order essentials via Instacart pickup: For access to a wider assortment of items available for pickup, including all your grocery and household needs, going through Costco‘s Instacart storefront is your best bet. Just be mindful of the service fee and order minimum.
-
Check for Instacart promo codes: Costco will often run promotions waiving the Instacart service fee on your first pickup order, so keep an eye out for these codes to save on the added cost of using the third-party platform.
-
Be flexible with substitutions: If you do go the Instacart pickup route, be sure to select backup substitution preferences for your items in case your first choice is out of stock. Costco‘s inventory tends to rotate frequently and being adaptable will help ensure you get what you need.
Could Curbside Pickup Be in the Cards for Costco?
Never say never. While Costco has been resolute that curbside is not a priority in the near-term, retail industry consultant Brittain Ladd sees potential for the company to revisit the service down the line, perhaps with a different approach.
"I believe Costco should offer pickup lockers to fulfill online grocery orders and orders for other fast-moving items," Ladd wrote in a 2022 Forbes column. "Costco should [also] design smaller stores that only fulfill online orders. This will give Costco more pickup points at a lower cost."
Whether Costco decides to take another shot at curbside remains to be seen, but one thing is for certain: the retailer will be meticulous about only investing in the service if it‘s assured to deliver the level of value that its members expect without compromising margins.
"Costco has been appropriately cautious to adopt newer services like curbside," MKM Partners analyst Bill Kirk writes. "They focus on areas of competitive advantage and avoid those that are not company strengths. […] We see Costco‘s disciplined approach to sticking to its knitting as a reason the company is consistently among the industry‘s best."
The Bottom Line on Costco and Curbside Pickup
For now, curbside pickup as it‘s traditionally come to be defined — with orders picked and brought out to the parking lot by store employees — is not in the cards at Costco. The retailer has determined the labor-intensive service simply doesn‘t align with its low-cost operating model, slim margins, and customer shopping preferences.
However, Costco shoppers still have options for online ordering and pickup, including:
-
Selecting eligible items (primarily big-ticket goods) for in-warehouse pickup at the store pickup counter.
-
Placing a larger grocery or household essentials order via Instacart for curbside pickup fulfilled by the third-party platform‘s shoppers.
Costco also continues to see strong adoption of same-day delivery through Instacart for customers who prefer the convenience of online ordering brought right to their door.
At the end of the day, while Costco may not be leading the pack when it comes to curbside pickup, the retailer‘s steadfast commitment to its business model and delivering unparalleled value to members has served it well. With renewal rates and sales at all-time highs, it‘s clear that for Costco and its loyal shoppers, curbside is more a nice-to-have than a need-to-have — at least for now.
