Costco Doesn't Offer Curbside Pickup. We Think We Know Why

Curbside pickup is becoming more and more popular in a post-Covid world, which makes it surprising that the first place you'd think to go to panic-buy enough toilet paper for a few months, Costco, still doesn't offer the service (via CNN). It's especially strange when you consider they're really the only store among their competitors — including Sam's Club, and BJ's Wholesale Club — to not offer customers this service.

This lack of curbside pickup could really hurt their bottom line when you consider that the number of households in America who have bought groceries online and picked them up curbside has more than doubled since this time last year, according to a survey by consulting firm Brick Meets Click. In fact, it might be the reason Costco's surge of sales at the beginning of the pandemic has started to peter out, as shoppers begin to rely more on other retailers with curbside pickup. So why isn't the chain adapting to customer needs?

While it might seem hard to believe, Costco does not currently have the physical space to introduce a curbside pickup program. Such programs require not only space for workers to assemble online orders, but coolers to keep perishable food fresh, and dedicated parking spots for pick up. 

According to Scott Mushkin, analyst at R5 Capital who spoke to CNN, "Their clubs are so busy. It's a tough thing to do. There's not a lot of backroom space. Stuff goes right to the floor." In fact, the lack of space may be the main reason Costco doesn't offer curbside pickup. Doing so would require the chain to completely reconfigure their store layout, and that doesn't just take time and effort, it also takes money. 

Unfortunately, the chain probably can't afford to implement what would probably turn out to be quite a profitable service. A curbside pickup program would require the retailer, which already operates on thin profit margins, to hire a dedicated team to assemble the orders and deliver them to cars. So, while competitors are seeing success with the free service they offer customers, Costco has stalled in this area (via Retail Wire). "We continue to look at what others do, we continue to scratch our head a little bit," Costco CFO, Richard Galanti said on a recent earning call. "It's not that we'll never do it, but it's not on the agenda for this week."

Luckily, while Costco is losing some customers to competitors that are offering curbside pickup, including Walmart and Target, they are still seeing the customers they do have buying in greater quantities (12.7 percent greater, to be exact) compared to this time last year, meaning they're still doing some things right (via Fox Business).

Galanti noted on the call, "We want you to walk the warehouse and see what we have to offer." And isn't that the best part of shopping at Costco? While wandering the massive aisles, you're sure to see all kinds of products you didn't know you needed, at discount prices, making you more likely to add a few impulse purchases to your cart on your way to grab the essentials. If customers had the option of curbside pickup, it wouldn't only remove these impulse buys, it could mean a complete pivot in the way customers interact with Costco (via Yahoo! Finance).

As McKinsey senior partner Sajal Kohli puts it, this one change could shift the chain towards "small-drop economics" and away from large bulk orders, which would change the entire cost structure of the company and therefore poses a substantial risk to Costco. So, it makes sense that they're not quite willing to take the risk to establish curbside pickup just yet (via McKinsey & Company). Never say never, though, as Galanti's also said, "We don't have our head in the sand on it, we look at it, we have people here who study it, maybe we'll surprise you one day."