Dive Brief:
- Costco outpaced Walmart, Jet and Amazon on desktop ad impressions related to grocery delivery during a recent two-week span, according to search marketing firm AdGooroo. Costco’s 11.4% share of clicks was second to Instacart, which dominated with a 23.5% share.
- For its analysis, AdGooroo tallied clicks related to 38 different grocery e-commerce keywords, including “grocery delivery” and “online grocery shopping.” The firm measured clicks between Oct. 27 and Nov. 9. Prior to this measurement period, AdGooroo did not show Costco’s search data.
- Costco’s share of voice in grocery delivery impressions, meanwhile, was 14.6% compared to Instacart’s 17.1% share.
Dive Insight:
Costco is making a strong showing in paid search advertising less than a month after it launched CostcoGrocery, a two-day delivery service for shelf stable products. The club retailer also offers delivery in some markets with Shipt and Instacart, having recently announced an expanded relationship with the latter.
All of this momentum amounts to playing catchup for Costco. The company has always put its store experience first, offering a curated, frequently rotating selection of high-quality bulk products in a warehouse setting. Costco knows it can’t replicate its winning store experience online. Its members tend to spend less when ordering from home, despite the wider selection of products. Costco also spends a lot of money delivering bulk goods.
Costco’s store-first strategy has led many analysts to refer to it as “Amazon-proof.” But there are dark clouds on the horizon. Many of its club members are also Amazon Prime members. Up until now, this hasn’t hurt the company, but that’s because Costco’s grocery offerings — the main driver of store trips — have been superior in price and, with an ever-growing assortment of organic and fair trade produce, at least equal in quality, too. But lower prices and special Prime deals — both online and at Whole Foods stores — could draw customers away from Costco. Improving online ordering and delivery of Whole Foods products, which many predict will happen, could also cut deeper into Costco’s sales.
So while Costco has been dragged kicking and screaming into e-commerce sales, it seems to be focused on making the most of the opportunity. Its paid advertising prowess should translate into increased sales, and could also help drive brand awareness and even motivate people to visit stores. The question is, will shoppers see enough value in its online delivery programs to stay loyal to the company, or will they be wooed by more attractive offers from Walmart, Jet and Amazon?
