Costco apparently kicked around something like the technology behind Amazon Go, the new automated convenience store concept from Amazon that everyone’s talking about, 20 years ago.
Richard Galanti, Costco’s chief financial officer, said on the company’s latest earnings call this week that Costco, which is headquartered in Issaquah, Wash., looked at a somewhat automated shopping option but didn’t go for it ultimately. From the call:
In terms of scan-and-go, honestly we did a version of scan-and-go literally 20 years ago. The customer, I remember, would walk in and get an RF gun, a radio frequency device, walk around scan their own items, come up to the front, hand that thing to the cashier and the scanner and they print out a receipt. Needless to say, there’s a lot more efficient things today. We continue to look at scan-and-go type things. We are not testing it currently but we are looking at it.
The biggest selling point for Amazon Go, which opened its first location for private beta testing in Seattle this week with public opening set for early next year, is no checkout lines. This is possible because of technology like RFID to detect when a shopper takes an item from the shelf, and then syncs the data to a handheld device.
That means the system is logging the items as the shopper goes along, which eliminates the need to go through a traditional check-out line. When customers exit the store through a “transition area,” the system senses that they’re leaving, adds up the items and charges their Amazon account.
In general, Costco hasn’t made as big of a technology and online commerce push as other retailers have to compete with Amazon. Costco’s identity as an in-bulk retailer where people go to load up huge carts full of things they need — and a few they don’t — has helped it stand out in a crowded marketplace.
But that doesn’t mean Costco is neglecting e-commerce entirely, Galanti said. Costco is adding more items to its website and reducing the number of clicks required to complete orders. The company is also building more distribution warehouses to speed up and decrease the cost of delivery.
Galanti acknowledged that Amazon has become “the word for everything out there that’s delivered.” Costco is watching Amazon, and all of its competitors, to understand what they are doing when it comes to in-store experience, online retail and blending those two concepts.
But the in-store experience is still Costco’s bread and butter. And the younger generations are responding. Galanti said a couple years ago its average adult member was four years older than the average age in the U.S., and today that gap has closed to a two-year difference.
Galanti also acknowledged the trend of click and pick up that is driving Amazon’s grocery stores in Seattle’s Ballard and Sodo neighborhoods. Fred Meyer has an online pick up program called ClickList that it recently added to its Ballard store, just down the road from the Amazon store. Walmart also has a click and pick up service.
Galanti said Costco has looked at click and pick up but isn’t prepared to do it right now. The high volume of its stores and the large size of orders, make click and pick a tough proposition for Costco.
“When we see it in other places, not just the other warehouse club, you need space for it or you need a lot less volume in the location for it neither of which we have and we’re not getting a lot of demands for it,” Galanti said on the call.