For much of its existence, Costco did not focus on shopping experience because its core goal was keeping prices low. The company famously uses warehouses — literally pallets of merchandise on the floor — as its stores to eliminate the cost of moving inventory from the back to the front.
Every aspect of the experience was low tech. Membership cards were physical cards, checkout was done by a clerk with a scanner, and the company did not even sell items on its website.
As a longtime Costco member who has written about the chain for more than a decade, it always seemed like frugality and not investing investing in technology was a sort of badge of honor.
It’s not that the chain never invested in tech. Instead, it usually waited for rivals to solve the problem, then created its own version of whatever Costco management saw as the new table stakes.
Now, however, Costco has made some technology investments to improve checkout, make its app more useful, and to improve its delivery offerings.
Costco improves its in-store experience
Costco CEO Ron Vachris explained some of the chain’s recent technology investments during its third-quarter earnings call.
“In digital, we’re making meaningful strides to deliver a more seamless and convenient experience for our members across the warehouse and online. As a result of our investments in technology and the commitment from our employees to use this technology to deliver a great member experience, we’re seeing a significant improvement in the speed of checkout,” he said.
Costco has added scanning technology where a worker can pre-scan a shopper’s cart while they’re waiting in line. The warehouse club also has ended the need for members to carry a physical membership card.
“The enhancements we have made include improvements to the mobile wallet, and the introduction of digital membership card quick access on the Costco app,” he added.
Costco’s changes have produced real results.
“The warehouses that are first to adopt this pre-scan technology have shown checkout speed improvements of up to 20%. And across our U.S. warehouses overall, we achieved record levels of checkout productivity in the final weeks of the quarter,” he shared during the company’s Q1 earnings call.
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Costco has also worked to create a delivery offering that rivals those of Walmart, Amazon, and Target. Costco built out the service with partners, including Instacart in the United States.
“Same-day delivery powered by our third-party partners has become a highly effective way to deliver more convenience to our members. Average same-day delivery time in the U.S. is now less than 45 minutes, and the average member satisfaction rating is 4.8 out of 5,” Vachris said.
Costco cleans up a lot of problems
For members, faster checkout and shorter lines are an obvious benefit. The changes help Costco as well, and not just by raising customer satisfaction.
“For Costco, the upside is twofold. First, faster turnover frees up parking spaces and increases transaction capacity during weekend peaks without requiring the construction of new square footage. Second, richer first-party data on basket composition and trip frequency arms buyers and marketers with insights they can’t glean from anonymous cash sales. In other words, every scan is also a data point,” according to RetailWire.
GlobalData Managing Director Neil Saunders does not think Costco has undergone a “radical reinvention.” He believes Vachris’ management team, which took over on Jan. 1, 2025, sees an opportunity to use technology better.
“In my view, he is correct in his assessment. Costco can improve in areas like collect-from-store, checking what’s in stock at the warehouse, and making the e-commerce process easier,” he wrote on RetailWire.
The changes, he noted, will be selective.
“Costco isn’t going to offer every item for collection because some of its bulky products just don’t lend themselves to that kind of service, and most customers love visiting the warehouse. So, I’d say this is all more of a gentle technology evolution than a massive transformation,” he added.
Dominick Miserandino, CEO of RTMNexus, told TheStreet that Costco has a very simple motive with its tech investments.
“Costco isn’t digitizing for buzz. Its digital and in-store tech is translating directly to faster service and stronger member engagement,” he shared.