Costco can't be called a digital pioneer. Its website, while much improved in recent years, has never been a major focus for the chain.
That's because technology is expensive and the warehouse club has always been very careful about investing in anything that takes away from its ability to keep prices low.
Costco (COST) , however, has been very clever in its digital partnerships. Its deal with Instacart, for example, gives members access to same-day delivery without the warehouse club having to build out that service itself.
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In addition, Costco has found clever ways to offer fast service and fulfill online orders.
Digital sales are clearly a potential growth area for the company, but equally clear is that it won't be following the traditional model.
Retailers like Amazon have massive fulfillment centers and supply-chain networks that cost them billions to build. That's essentially an endless investment as Walmart and Amazon, along with Target to a lesser extent, try to get ever-faster delivery on even more items.
Selling hundreds of millions of items from your own warehouses requires very deep pockets. That's not the Costco way, but the company has found a way to offer its customers more big-ticket items at Costco-like prices without adding much expense.
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Costco has a new website
Many Costco customers don't go to its main website, so they may not even realize that the company has a second site, CostcoNext.com. And even if you have been there, it's not super clear what you're looking at unless you click on the About Us tab at the top right corner of the page.
There, the company explains what it's trying to do with its new site.
"Costco Next showcases a selection of limited products from some of Costco's most trusted suppliers," the warehouse club explains. "Designed to complement both our inventory and quality standards, Costco Next features suppliers and products that have been hand-selected by our buyers for their quality of merchandise and exceptional customer service. So you can feel confident while shopping, knowing that you're choosing products from brands you can trust."
The business genius is that while Costco is facilitating the sale, it's never touching any of the merchandise.
"While shopping Costco Next, you'll have the opportunity to purchase products directly from a Costco Next supplier's site, where you'll enjoy special Members Only Values," the company added. "This innovative approach helps us achieve our goal of bringing a broader selection of goods to our members, while increasing the value of the Costco membership."
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Costco has big plans for Costco Next
Recently retired Costco Chief Financial Officer Richard Galanti had talked about the new website during the company's second-quarter-earnings call, his final one with the brand.
"A couple of comments on the seller platform. This, costconext.com, allows our members to have exclusive access to direct-to-consumer sites for top-quality brands at Costco value pricing. Currently, there are about 70 Costco Next brand sites with 15 additional sites in development," he said.
All those "sites" are essentially added merchandise that Costco members can buy with the company being strict about its partners and ensuring that those partners offer warehouse club-style pricing.
"We will likely end this calendar year with about 90 sites and continue to grow from there," Galanti said. "Costco Next offers everything from home improvement to apparel, to pet, to home, to kitchen to electronics, to accessories as well as sports, bicycles, and toys. You should check it out. It's a pretty good site."
Costco Next is part of a broader effort to improve the company's digital offerings.
"Progress continues to be made in our e-com, mobile, and digital efforts. ... In February, we rolled out our new native mobile application homepage on iOS. The native homepage now loads in less than two seconds, compared to eight seconds previously," the now-retired CFO added.
