Dive Brief:

• Grocery delivery service Shipt announced it has partnered with Costco to offer home delivery in the Tampa market, according to CNBC.
• Sources noted that Costco has mainly focused on delivery to businesses up to this point, and that home delivery is an “experimentation” for the company. Costco also offers home delivery in the San Francisco market through Instacart. 
• Shipt, meanwhile, has aggressive growth plans in its sights. By the end of this year, the company says it will offer grocery delivery to more than 30 million households in 50 markets.

Dive Insight:

Expanding its online ordering and delivery footprint is a defensive move for Costco, which has mainly focused on its in-store experience as competitors like Sam’s Club and BJ’s — and traditional grocery stores — have ramped up their e-commerce presence.

Still, the move towards faster home delivery could add value for the club retailer if it expands quickly. It would offer a point of differentiation from Sam’s Club and BJ’s, which both offer store pickup of online orders, and give its members another reason to shop with the company. Loyal customers might even be willing to pay more for their membership. 

Home delivery of bulk items makes sense for a lot of shoppers given the cost savings, not to mention the time and energy saved. This could give the company some key advantages over mainstream grocers, particularly with shoppers who like to stock up. This includes millennial consumers, particularly those with families, who actually prefer club shopping more than the average person.

But this move does little to address Costco’s chief competitor, Amazon, which offers a broader delivery footprint and many of the same bulk goods as the club retailer. According to Timothy Campbell, an analyst with Kantar Retail who covers club stores, Amazon Prime is attracting club shoppers — particularly younger ones — at a higher rate than the overall population.

“So far, clubs have room to grow in spite of Amazon, but that could change down the road if clubs don’t innovate the value they provide,” Campbell told Food Dive.

Costco’s in-store experience will continue to be its primary draw, but it has a lot of work to do in the e-commerce space if it hopes to keep Amazon and other competitors at bay.