Costco built its brand on supermarket staples. If you wanted a truckload of toilet paper or enough ham to pack 50 sandwiches, it was the place to go. But Costco has increasingly moved beyond mustard and milk.
The most well-known “surprise” in Costco’s sales success strategy may be the boom in gold bars bought by its customers in recent years. But the big-box retailer is also seeing a boom in sales of saunas and sofas, many of them purchased online. In industry parlance, these purchases are termed “big and bulky.”
On a recent afternoon at the Costco Warehouse in Liberty Township, Ohio, a constant stream of customers sat on, ran their hands over, and leaned on a prominent display of Thomasville sofas. Some customers stared in awe at the sofas as if they had never seen one before. Maybe they just weren’t expecting to see one at Costco. While it is still new to some customers, the retail chain’s move into items like furniture has been picking up steam, and market share, over the past few years.
Here is what the company’s top executives and retail experts say about the continued shift in branding, and the various ways it can help the retailer continue to grow its membership business and diversify sales.
It’s a good way to drive business online and into a company app.
A worker at the Liberty Township Costco Warehouse explained that if you buy the sofas at the physical store, you have to bring your own truck and you have to cart it away on the spot. If you order online, though, he noted, Costco’s delivery network will bring the new sofa to you and get rid of the old.
While there are some shoppers that haul sofas out of Costco, the majority of the big and bulky business is online, which has plenty of more room to grow.
E-commerce sales neared $20 billion in the company’s most recent fiscal year, increasing over 15%, according results shared by Costco on Thursday with its fiscal fourth quarter earnings. Online sales now total more than 7% of Costco’s annual net sales. Costco chief financial officer Gary Millerchip has noted in the past that only around half of members have downloaded the Costco app, suggesting that the addressable market is much larger.
About a year ago, Ron Vachris, the company’s CEO, said on the Costco Q3 2024 earnings call that sales of $1,200 swing sets were “blowing out” expectations. He said at that time 80%-85% of big and bulky items were being delivered through its logistics arm.
That momentum has continued, based on the fourth quarter results, with Millerchip telling analysts on a Thursday earnings call that the company continues “to grow share in big and bulky items sold online,” with the Costco Logistics playing a big role and resulting in a 13% increase in items delivered in the quarter. Last quarter, Costco had cited a 31% increase in deliveries via Costco Logistics, reflective of the trend towards bigger-ticket items.
The increased appearance of large items in Costco’s retail stores also reflects an opportunity to…
Read More: Costco’s ‘big and bulky’ boom keeps changing game in retail shopping
