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Costco Bets on Brick-and-Mortar for Long-Term Growth As Online Sales Surge

CEO Says $1.50 Hot Dogs, $4.99 Rotisserie Chickens Are Magnets for Foot Traffic

Photo Courtesy of Sundry Photography.

While retailers across North America experiment with new store formats and install pickup areas for digital orders, Costco CEO Craig Jelinek is looking at a simpler lure to bring shoppers into retail property once COVID-19 dissipates: $1.50 hot dogs.

Though online sales at the warehouse retailer surged 90.6% in the fiscal fourth quarter that ended in August and jumped 86.2% for the 13 weeks that ended last month, Jelinek still looks to brick-and-mortar stores as Costco growth engines.

“It’s still important to get people physically in the stores,” Jelinek said on CNBC. “I still think brick-and-mortar is not going to go away.”

In the days before the pandemic, Costco members long bragged about how they “ate their way” through stores because of all the food tastings typically offered, as well as the affordable fast food found in makeshift dining areas.

Taste tests are no longer offered, and it’s unclear if the Issaquah, Washington-based retailer will offer them in a post-pandemic world, but Jelinek — who rarely does interviews — said food is a magnet to customers.

“We want to continue to get people in the stores, and there’s no better way to do it than a $1.50 hot dog and a rotisserie chicken” at $4.99, he said.

At the start of the coronavirus outbreak when stay-home orders were mandated in many cities and states across the country, “we were going negative in traffic counts in February, March and April. Now, for the last three months, our traffic now has been very, very strong.”

Costco has more than 540 stores in the United States, a dozen of which opened this year, and about 100 in Canada. The membership-only wholesaler has plans to open one store in February, and it hopes to open as many as six in the third quarter and eight in the fourth quarter.

At the same time, Costco will stay on course to up its online business, Jelinek said, noting last year’s $1 billion purchase of Innovel Solutions, the shipping operator then owned by Sears parent Transformco.

“We see a big opportunity to build our last-mile business in big-ticket items, bulk items,” he said.



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