Costco — The Invisible Opportunity

The Company

A business built on one counterintuitive idea

Costco does not earn its profit from selling merchandise. It earns profit from selling access — and that structural difference explains almost everything about its financial performance, its competitive moat, and its digital opportunity.

How Costco got here

1983

First warehouse opens in Seattle. The founders' wager: a flat membership fee could replace per-item markup as the profit engine — creating a structural reason to always offer the lowest prices.

1993

Merger with Price Club creates the world's largest warehouse club. Scale amplifies advantages in supplier leverage and per-warehouse economics.

Early 2000s

Kirkland Signature launches as a private label. It now accounts for over 25% of merchandise sales — higher margin than branded goods, and a loyalty anchor no competitor can replicate digitally.

2017

AmEx deal ends; co-branded Citi Visa launches. Every transaction is now tied to a member identity — a first-party data asset most retailers paid billions to build.

FY2019

E-commerce is ~4% of net sales. The digital channel grows organically, but without targeted marketing, it remains invisible to most of the 53.9M paid members.

FY2024

E-commerce reaches $17.5B — nearly triple 2019. Yet it still represents just ~7% of total revenue against 76 million paying members who largely don't know the full platform exists.

FY2025

Costco raises membership fees for the first time since 2017 — individual to $65, Executive to $130. Membership fee revenue climbs 10% to $5.3B. Paid members hit 81 million. E-commerce comps grow 15.6% for the full year. The model is working — but digital remains ~7% of sales.

Shopper walking through Costco warehouse aisles

The membership flywheel

Costco operates merchandise near break-even. The margin lives in the annual membership fee — $65 for Gold Star, $130 for Executive. In FY2019, those fees totaled $3.35B. By FY2025, fees grew to $5.3B across 81 million paid members — and operating income of $10.4B means membership fees cover more than half the entire profit base.

Why does a $65/year fee matter so much? Because membership fees drop almost entirely to the bottom line. Costco's merchandise gross margin is ~11% — tight by design. But membership fees have near-zero incremental cost. 81 million members paying ~$65 on average generates $5.3B in near-pure-profit revenue, with no warehouse staffing, inventory, or fulfillment overhead attached. That's why protecting the renewal rate is the company's single most important strategic objective.

The strategic implication: Costco does not need to maximize margin on every transaction — it needs to maximize member satisfaction. That creates an opening for digital expansion that conventional-margin retailers cannot match. A member who shops online costs nothing in incremental acquisition; they are already paying the annual fee.

FY2025 membership fees

$5.3B

Up 58% from $3.35B in FY2019

Warehouses worldwide

914

As of FY2025 year-end

US/Canada renewal rate

92.3%

FY2025 — above 90% for 6th straight year

Revenue CAGR 2015–2025

~9.0%

$116B to $275.2B

Total revenue, FY2017–FY2025 — net sales vs. membership fees ($B)

Revenue nearly doubled over seven years, but the membership fee bars tell the more important story: membership fees grew from $2.85B to $5.3B — an 86% increase while merchandise margins barely moved. The profit engine is the fee. That fee is protected by loyalty. And that loyalty is what makes the digital opportunity so large — Costco already owns the audience it would need to pay to reach.

Net sales Membership fees

From $129B in FY2017 to $269.9B in FY2025, Costco compounded at roughly 9.0% annually. Operating margins expanded from 3.1% to 3.79% — structural improvement from membership fee growth and product mix shift. What the chart does not show is where the next phase of growth originates. Physical expansion is slowing. The digital channel — currently ~7% of direct e-commerce sales, or ~10% when including BOPIS (Buy Online, Pick Up In Store) and digitally-initiated orders — is the logical growth frontier, and the revenue base above confirms Costco has the scale to fund meaningful investment there.

The Costco Experience

Why the treasure hunt is the product — and why that complicates digital

To understand Costco's digital challenge, you have to understand what Costco actually sells. It isn't bulk goods. It's an experience — and the $1.50 hot dog is its most powerful marketing tool.

The customer journey in the warehouse

The Costco warehouse is designed as a one-way treasure hunt. There are no aisle signs — you navigate by instinct. Products rotate constantly: the cashmere sweater may be gone next week. This isn't inefficiency; it's strategy. The layout forces the member to pass through the entire store to get anywhere.

ENTER

Membership card scanned. You're in. Giant TVs and outdoor furniture greet you — even if you came for coffee creamer.

MID-STORE

The Kirkland Signature aisle — 600+ products, from olive oil to cashmere sweaters to premium vodka. Higher margin than national brands, exclusively at Costco.

THE BACK

The rotisserie chicken is deliberately placed at the far back corner. It's $4.99 and sold at a loss. To get it, you pass electronics, furniture, appliances, clothing, and seasonal items.

CHECKOUT

Average basket: $180. Studies show members typically arrive intending to buy 5–6 items and leave with 12–15. That's the treasure hunt at work.

EXIT

The $1.50 hot dog and soda. Unchanged since 1985. It's not a food court item — it's a brand promise. Members defend it like a religion.

Kirkland Signature: the most powerful brand you've never thought about

Kirkland represents over 25% of Costco's merchandise sales — and it's growing. These aren't generic off-brand products. Many are manufactured by the same companies that make the national brand equivalents, often to higher specs.

Kirkland share of sales

>25%

~$67B+ in FY2025 merchandise

Kirkland SKUs

~600+

Olive oil to cashmere, vodka to vitamins

Rotisserie chickens sold

~100M/yr

At $4.99 — sold at or near loss

Hot dog + soda price

$1.50

"Those prices won't change for as long as he's in charge." — CEO Ron Vachris (U.S. News, Nov. 2025)

Costco Travel & Other Lines

Beyond groceries and goods, Costco runs one of the largest travel businesses in the US — vacation packages, cruises, car rentals, and hotels, exclusively for members. It also operates optical, pharmacy, tire installation, and a gas station network (747 stations worldwide). These "ancillary" businesses are entirely absent from the typical "Costco = bulk goods" mental model — and many members have no idea they exist.

The strategic tension: Everything that makes the in-store experience magical — the treasure hunt layout, the $4.99 chicken at the back, the $1.50 hot dog at exit — is physically impossible to replicate digitally. The question isn't whether Costco should digitize its treasure hunt. It's which categories and behaviors belong online without undermining the in-store experience that drives member loyalty.

The Digital Gap

Costco's members are loyal. Its digital strategy is not keeping up.

Sam's Club — Costco's most direct competitor — has made digital its core strategy. Walmart's CEO publicly called Sam's its "innovation engine." Meanwhile, Costco continues to rely on organic discovery to bring members online. That asymmetry is the central strategic problem this analysis addresses.

Awareness Gap

Most members don't know they can shop online

Costco's digital marketing spend is minimal relative to peers. Members associate Costco with the warehouse — not a platform where the same prices exist without the drive. Gabe Rivera, Front End Supervisor at Costco, confirmed this directly: "Consumers are more willing to shop [Amazon] compared to Costco online because it's what they're used to." That perception gap is the most solvable part of this problem.

Competitive Pressure

Sam's Club is investing heavily — and it's showing

Sam's Club has built scan-and-go checkout, full-scale curbside pickup, and a digital-first membership onboarding model. In online grocery market share, Sam's holds 5.1% to Costco's 1.2%. That gap widened because of deliberate, sustained investment — not an accident.

Structural Tension

The warehouse model creates a pull against digital

Costco's economics reward foot traffic. Members who shop exclusively online buy fewer impulse items and require fulfillment infrastructure. Management has historically prioritized warehouse visits — but younger members default to digital-first shopping regardless of management preference.

The Positive Signal

When members find it, they use it — and it grows

E-commerce comparable sales grew 16% in FY2024 and 20.7% in Q3 alone. Costco Logistics delivered 4.5 million items, up 29% year over year. App traffic grew 48% in Q1 FY2026. The platform works. The bottleneck is awareness, not product quality.

E-commerce comparable sales growth vs. total comparable sales, FY2019–FY2024 (%)

E-commerce comp growth versus total comp growth make the case directly. In four of six years, Costco's digital channel grew at more than double the rate of its physical stores — including 50% in FY2020 and 44% in FY2021. The FY2023 dip to -6% reflects post-pandemic normalization, not structural failure. The recovery to 16% in FY2024 confirms the underlying demand is real. The question the chart raises is simple: if these growth rates have been available for half a decade, why does digital still represent only 7% of revenue?

E-commerce comp growth Total comp growth

In the years where e-commerce growth was available (FY2020, FY2021), Costco captured it passively — pandemic tailwinds drove members online regardless of marketing. When those tailwinds faded (FY2023), the channel had no marketing foundation to hold its gains. The V-shaped recovery in FY2024 (from -6% to +16%) shows the demand is durable. Sam's Club, which invested in digital throughout this same period, did not experience the same reversal — that is the competitive comparison worth watching.

The Evidence

Three data points that define the opportunity

The numbers make the case more clearly than any framework. Costco's digital channel is growing fast, underfunded relative to peers, and sitting on top of a 76-million-member installed base that requires zero acquisition cost to reach.

~7%

E-commerce as a share of Costco's total revenue in FY2024

For context: Walmart's e-commerce share has grown to nearly 18% of US sales. Target's is similar. Sam's Club — with a fraction of Costco's resources — has pushed its digital penetration above 15%. The table below makes the competitive distance visible.

The 7% figure is not a ceiling — it's a baseline set by organic growth alone. Including BOPIS (Buy Online, Pick Up In Store) and other digitally-initiated purchases, digitally-enabled sales reached ~10% of net sales in FY2025. With deliberate investment, the addressable share is far higher. The chart below quantifies what that curve looks like — and what a targeted campaign could do to it.

E-commerce revenue, FY2019–FY2024 ($B)

Costco's e-commerce revenue tripled in six years — from $6B to ~$18.9B — through organic demand alone. Notice the FY2023 dip — caused by post-pandemic normalization — then steady recovery: $17.5B in FY2024, $18.9B in FY2025. A targeted member activation campaign would steepen this curve further from its current trajectory.

Consider the counterfactual: 76 million members, one additional online purchase per member per year at an average of $150 — that is $11.4B in incremental revenue. Capturing 10% of that through a focused campaign is $1.1B in new digital revenue, against a marketing investment that would be a small fraction of that figure. The math is unusually favorable because the audience acquisition cost is effectively zero — these people already pay Costco annually.

Where Costco stands relative to peers

The highlighted row below is the outlier — the company with the strongest member loyalty in the sector and the weakest digital penetration. That combination is unusual, and it points to a marketing gap rather than a structural limitation.

Company	E-comm % of sales	Digital strategy	Status
Amazon	~70%	Pure-play; logistics moat	Dominant
Walmart	~18%	Omnichannel at scale	Advancing
Target	~18%	Drive-up; strong app	Advancing
Sam's Club	~15%	Scan-and-go; digital-first membership	Investing heavily
Costco	~7%	Organic; limited marketing	Underweight
BJ's Wholesale	~5%	BOPIS investment; smaller scale	Catching up

Sources: company filings, Digital Commerce 360, Nasdaq. FY2024 estimates.

Paid memberships and US/Canada renewal rate, FY2019–FY2024

Paid membership growth and the US/Canada renewal rate together make the opportunity plain: Costco grew from 53.9M to 81M members while US/Canada renewal rates held above 92% for the sixth consecutive year. The member base is larger and more loyal than at any point in the company's history. This is the digital campaign's audience — and it already belongs to Costco.

Paid members (M, left) US/Canada renewal % (right)

One nuance worth flagging: Costco's CFO noted in Q2 FY2025 that online members renew at a slightly lower rate than warehouse sign-ups — the US/Canada renewal rate dipped 10 basis points to 92.1%, attributed directly to "new online members growing as a percentage of our total base." This means the digital campaign must include a retention component. Driving first online orders is not enough — the online experience must be strong enough to sustain the renewal rate that underpins the entire fee-based profit model.

Operating margin trend, FY2017–FY2024 (%)

Operating margin expanded from 3.1% in FY2019 to 3.79% in FY2025 — a meaningful drift upward despite razor-thin merchandise margins. This is the model working as intended: membership fees plus a modest shift toward higher-ticket product mix. The relevance to digital strategy: e-commerce categories such as appliances and electronics carry higher per-unit margins than gasoline, which alone suppresses the overall rate by roughly 30–50 basis points. A deliberate shift toward higher-ticket digital sales is one of the few ways Costco could expand this figure without altering its pricing philosophy. The upward drift in operating margin from FY2019 to FY2024 reflects this mix shift already beginning to play out.

At $254.5B in revenue, each 10 basis points of operating margin improvement equals roughly $254M in incremental operating income. Costco Logistics' growth (4.5M deliveries in FY2024, up 29%) is already demonstrating that big-ticket delivery economics work — management cited appliances and furniture as the lead e-commerce categories. A digital campaign targeting these high-margin categories first aligns the awareness investment with the highest margin payoff, making the financial case for investment even cleaner.

Validation

What the data, members, and experts say

Claims about member awareness, competitive position, and online behavior require evidence — not just intuition. Here is what the primary and secondary research shows.

Behavioral Data

High traffic, low conversion: the awareness gap in numbers

Costco's own quarterly filings reveal the disconnect: e-commerce site traffic grew 27% in Q4 FY2025 and app traffic grew 45% in Q1 FY2026 — yet e-commerce remains ~7% of net sales. Members are browsing, not buying. CFO Gary Millerchip attributed renewal rate dips directly to online cohorts, saying on the Q1 FY2025 earnings call: "Renewal rates are down slightly as it attracts more new members through digital channels. Those signups tend to renew at a slightly lower rate." High curiosity, low conversion, weaker retention — the pattern points to an awareness and onboarding gap, not a product gap.

Analyst Research

Morningstar: the wide moat holds, but digital retention is the test

Morningstar analyst Brett Husslein, in a March 2026 note, wrote that Costco's "expanding profitability and membership loyalty reinforce its wide moat" while flagging that the 20-basis-point dip in US/Canada renewals "will begin to stabilize over the midterm as Costco improves its targeted retention capabilities among digitally acquired younger members." Morningstar maintains Costco's Wide Moat rating, but identifies digital retention of younger cohorts as the key variable to watch over the next three to five years.

Executive Statements

CEO Vachris: digital is core to the future — but not at the expense of values

CEO Ron Vachris told U.S. News in November 2025 that Costco is "considering ways to improve the member experience, such as expanding the company's digital presence" — but added the constraint that "whatever Vachris does, it must be consistent with what people expect from Costco — its value-for-money and its core values." He also reaffirmed to investors: "Being competitive on pricing is part of our everyday DNA." The challenge is not whether to go digital — it is how to do it without compromising the brand promises that make Costco irreplaceable.

Competitive Benchmarking

Sam's Club's "scan-and-go" as a natural experiment

Sam's Club invested in digital in 2019–2021. By FY2023, its e-commerce share exceeded 15% vs. Costco's ~7%. Same warehouse club model, same demographics, different digital commitment. The performance gap is not explained by product quality or pricing — it is explained entirely by deliberate marketing and digital UX investment. Sam's Club is the closest thing to a controlled experiment Costco has.

CFO on Online Renewal Rates

Management has named the risk — and the cause

CFO Gary Millerchip was explicit on the Q2 FY2025 earnings call: "The decline in renewal rates was largely attributable to a higher number of online sign-ups entering the renewal rate, and this quarter included a large Groupon campaign in December 2023 entering the calculation." On the Q4 FY2025 call, he added: "The decline is primarily due to online sign-ups that renew at a slightly lower rate. We foresee a few more quarters of similar impacts." This is not speculation — management has identified online acquisition without retention as an active risk to the membership fee model.

Younger Member Cohorts

Millennial and Gen Z shopping behavior

Inflation-driven value-seeking brought large numbers of Millennial and Gen Z shoppers to Costco in FY2022–2023. Costco's own investor communications reference "new member cohorts with higher digital expectations." These members default to digital-first. Without a digital activation strategy, Costco risks winning their physical visit but losing their digital wallet share to Amazon Prime — which charges $139/year and is entirely digital-native.

★ Primary Research

Insider interview: Costco warehouse employee

We interviewed Gabe Rivera, a Front End Supervisor at Costco Wholesale. His responses confirm this analysis's core claims from the inside:

On why members avoid shopping online: "They're able to get the same product in store at a cheaper price compared to the website, and it gets people to the store so they can have an actual experience visiting Costco."
On awareness of Costco Next (the online-only supplier program): "I would say maybe 20% of people know about Costco Next." — a dramatic gap even among members actively engaging with the brand.
On who actually shops online: "The consumers that shop online are the ones that don't have a Costco close by to them."
On the website experience: "If Costco revamps their website a little bit and makes it more user friendly, then I can see their website being a little more successful."
On the treasure hunt: "You'll never know what to expect when you step inside a Costco and I think it gives people a thrill whenever they walk into one."
On what drives in-store loyalty: "Social media has a big influence on what new hot item Costco is carrying that makes consumers think they need to have it."

Source: Primary interview with Gabe Rivera, Front End Supervisor, Costco Wholesale, 2025.

"We have a clear road map for future digital enhancements and believe these will allow us to continue to grow digitally-enabled sales at a faster pace than overall sales."

— Gary Millerchip, CFO, Q2 FY2026 Earnings Call

The Price Paradox

Why are Costco's online prices higher than in-store?

Members who discover Costco.com often notice the same item costs more online. This isn't a mistake — it's structural. Understanding it is essential to evaluating any digital strategy.

Three reasons the gap exists

Fulfillment Cost

Delivery isn't free at warehouse scale

In-store, the member does all the logistics: drives to the warehouse, loads the cart, drives home. Online requires Costco to pick, pack, and ship — often items weighing 30–80 lbs. That cost is embedded in the online price. For the $1.50 hot dog or a 40-pack of paper towels, the in-store model is simply cheaper to operate.

SKU Selection

Online carries different (and pricier) SKUs

Costco warehouses stock under 4,000 SKUs — the fastest-moving bulk items at maximum negotiated volume. Costco.com carries 9,000–10,000 SKUs, including specialty, oversized, and made-to-order items that never appear in stores. These naturally carry higher per-unit costs. The comparison of "same item, higher price online" often involves different configurations entirely.

Strategic Choice

Intentional: protecting warehouse traffic

Costco's management has historically priced online higher to avoid cannibalizing warehouse visits — the engine of impulse purchasing and the "treasure hunt" experience. A member who buys paper towels online removes one reason to visit the warehouse. The price differential is a deliberate friction point, not an oversight.

"A diverse group of employees helps bring originality and creativity to our merchandise offerings, promoting the 'treasure hunt' that our customers value."

— Costco Proxy Statement to Investors, 2024

What this means for the digital strategy

The price gap is a real strategic constraint. Any digital push that doesn't address it will underperform — members who go online, find prices higher, and return to the store are not being served by the digital channel. This creates a clear framework for what should and shouldn't move online:

Category	Online pricing	Rationale
Appliances, Furniture, Electronics	Competitive	Bulky — members prefer delivery. No traffic loss.
Costco Travel, Auto	Online only	Can't buy in-store. Digital is the only channel.
Kirkland specialty items	Near parity	Exclusive brand reduces substitution risk.
Consumables, Groceries	Always higher	Protect warehouse trips for high-frequency visits.
$1.50 hot dog	Never online	In-store icon. Pricing it online would break the myth.

Strategic targeting of online categories is the prerequisite to any digital awareness campaign.

Strategic Context

Why the gap persists — and why now is the moment to close it

The forces shaping Costco's competitive environment have shifted in ways that make the digital gap both more dangerous and more addressable than it was five years ago.

Five forces shape the competitive logic of warehouse retail — and each one is shifting in ways that make Costco's digital underinvestment a more urgent strategic risk than it was in 2019.

New entrants — Low threat, but changing

No traditional retailer can replicate Costco's scale. But digital-native entrants — Amazon, Temu — can target Costco's members online without a single warehouse, competing for the digital attention Costco is not yet claiming.

Buyer power — Medium and rising

Existing members have low price sensitivity. But Millennials and Gen Z carry higher digital expectations and are more willing to comparison-shop online. Costco risks becoming a "parents' retailer" unless it builds a credible digital experience for this cohort.

Supplier power — Low, and an advantage

Costco's scale gives it extraordinary supplier leverage. This extends to digital: exclusive online deals and digital-only SKUs are realistic strategies suppliers would welcome given Costco's traffic volume. A stronger online platform amplifies an advantage that already exists.

Substitutes — High and accelerating

Amazon Prime is the closest structural substitute to Costco's membership model — and it is digital-first. The risk is not that warehouse regulars defect. It is that the next generation never forms the in-store habit at all, choosing Prime as their default "membership" before Costco's digital channel earns their attention.

Rivalry — Intensifying, specifically Sam's Club

Sam's Club is Costco's most direct digital threat. Backed by Walmart's full technology investment, it has made scan-and-go, curbside, and digital membership its core strategy. The longer Costco waits, the wider the digital loyalty gap becomes in the segment that matters most: first-time, younger members.

Strengths

92.9% US/Canada renewal rate is a captive audience at near-zero acquisition cost. Kirkland Signature creates a reason to shop Costco digitally rather than substituting with Amazon. First-party member data across every transaction is a marketing asset most retailers paid billions to build. Instacart partnership already provides last-mile grocery infrastructure.

Weaknesses

Digital marketing budget minimal compared to Walmart and Sam's Club. Online prices have historically been higher than in-store, creating a perception barrier. Limited BOPIS capability relative to Sam's Club. Brand awareness for the online channel is effectively zero among most existing members — the core problem this analysis addresses.

Opportunities

76 million already-paying members — the lowest-cost digital audience in retail. E-commerce growing 16–20% annually with limited marketing support. Executive members (74%+ of sales) are high-income and digitally capable. Costco's app grew 48% in traffic in Q1 FY2026 — infrastructure that already works and just needs audience directed to it.

Threats

Sam's Club investing aggressively in digital with Walmart's full technology backing. Amazon Prime offers a competing "membership" model that is entirely digital-native. Online members renewing at slightly lower rates is an early warning — if digital acquisition continues without improving retention, renewal rate erosion could undermine the fee-based profit model.

Assessing Costco's internal capabilities against what digital expansion requires — identifying durable advantages and critical gaps.

Member identity data — Sustained advantage

Costco's closed membership system ties 100% of purchases to a member identity. In an era of cookie deprecation and privacy regulation, this first-party data is worth more than it has ever been. It is the foundation of any personalized digital campaign — and no competitor can replicate it without an equivalent membership model.

Kirkland Signature — Sustained advantage

No competitor has come close to replicating Kirkland. It drives higher margins online than branded equivalents — critically, it is a reason to shop Costco digitally rather than substituting on Amazon. A campaign centered on Kirkland exclusivity would be the strongest possible message.

Fulfillment infrastructure — Temporary advantage

Costco Logistics delivered 4.5 million items in FY2024, up 29%. The Instacart partnership provides grocery last-mile. Both are improving, but remain nascent relative to Walmart's 4,600-store network. The advantage is real but requires sustained investment before the window closes.

Digital marketing capability — Competitive gap

Costco's digital marketing spend and sophistication trail all major peers. Its own data shows Meta drives 93.4% of social checkout traffic — yet that channel is largely underinvested. This is the clearest gap to close: not technology, not product, not pricing — it is the marketing capability to deploy the assets Costco already owns.

The macro environment has shifted in ways that make this moment well-suited for Costco to invest in digital activation — several tailwinds are converging simultaneously.

Technology — First-party data becomes more valuable

The deprecation of third-party cookies and tightening privacy regulation have raised the value of owned member data. Costco's closed-loop membership system is structurally positioned for this environment. Every major competitor is spending billions to acquire what Costco already has. Activating it for digital marketing is the obvious next step.

Economic — Value-seeking created a new cohort

Inflation-driven value-seeking behavior brought Millennial and Gen Z consumers to Costco in large numbers during FY2022–2023. Many shopped in-store but never discovered the online channel. These members' loyalty is still forming — a digital campaign to this cohort, while the relationship is new, carries disproportionately high long-term ROI.

Social — Default digital behavior among younger members

Millennials and Gen Z shop digitally first and physically second. A retailer without a credible digital channel is perceived as incomplete regardless of its physical experience. Costco's in-store-first model risks being coded as "for parents" unless digital marketing actively reframes that narrative.

Competitive — The window for digital leadership is narrowing

If Costco waits another 3–5 years to invest meaningfully in digital awareness, Sam's Club may have established enough digital loyalty among the key 25–40 demographic that the window closes permanently. The competitive clock — not Costco's readiness — is the binding constraint on timing.

Our Recommendation

Activate the members you already have

Costco already sells online — the app is integrated, members receive mailers, and the platform is growing. The question is how to grow it without undermining the in-store treasure hunt that defines the brand. Costco should not try to become Amazon. It should run a targeted digital awareness campaign aimed at its existing 81 million members — turning passive cardholders into active online shoppers, without disrupting the warehouse experience that built the brand.

Phase 1 · Year 1

Tell members the platform exists

The most fundamental step: a deliberate, funded campaign making members aware that Costco.com offers warehouse prices with home delivery.

Targeted email campaigns to all 76M members using purchase history to surface relevant recommendations
Social advertising (Meta, YouTube) anchored to "same Kirkland prices, delivered" — Meta already drives 93.4% of social checkout with minimal investment
In-warehouse checkout prompts driving app downloads and first online orders
Exclusive online-only deals on high-ticket items to create a discovery incentive

Phase 2 · Years 2–3

Protect the renewal rate as digital grows

Costco's CFO has already flagged that online members renew at lower rates. Phase 2 closes that gap before it becomes structural.

Digital onboarding sequence for new online sign-ups — curated lists, first-delivery guarantee, Kirkland intro offers
Expand BOPIS (Buy Online, Pick Up In Store) to all US locations — the Sam's Club playbook applied to a superior product assortment
Executive Membership upgrade incentives tied to online purchase milestones
Deepen Instacart partnership for high-frequency grocery same-day delivery between big-ticket purchases

Phase 3 · Years 3–5

Turn the data flywheel into a personalization engine

Costco already has the member data. Phase 3 builds the infrastructure to deploy it at scale.

Build out the retail media network Costco is already piloting — first-party data as a revenue-generating ad platform for suppliers
Personalized digital catalogs replacing the printed warehouse mailer
App-first international expansion in markets where physical footprint is limited
Scale recommendation carousels — in Q1 FY2026, they already drove $470M in e-commerce sales alone

Anticipated risks — and why they are manageable

Cannibalizes warehouse traffic

Focus the campaign on big-ticket, bulky categories — appliances, furniture, electronics — where in-store buying is impractical. Costco Logistics' 29% growth already demonstrates these categories deliver profitably without cannibalizing warehouse visits for high-frequency consumables.

Fulfillment costs compress margins

BOPIS requires near-zero incremental fulfillment investment. Costco's own CFO acknowledged that "the savings on delivery for larger items outweigh the costs." By targeting high-ticket categories first, the margin math is positive from the outset.

Online members renew at lower rates

This is precisely why Phase 2 is built around digital retention, not just acquisition. Costco's management has already identified this as a priority — the recommendation formalizes and funds what they are already trying to do informally.

Disrupts low-price brand perception

The campaign message must be anchored in "same warehouse prices, now online." The critical prerequisite is resolving the in-store versus online price gap on select products before launch — pricing parity is the foundation the entire campaign rests on.

Undermines the treasure hunt experience

This is the most legitimate strategic risk. Costco's competitive advantage — the in-store experience that drives impulse purchasing — cannot be digitized. Any digital push must be anchored in categories where online is clearly preferable (appliances, travel, electronics) and explicitly not in the high-frequency consumables that drive warehouse visits. The goal is complementarity, not substitution.

Membership model doesn't need fixing

This is a real counterargument. Paid memberships grew 6.3% in FY2025, renewal rates held above 92%, and fee revenue grew 10%. If the model is working, why push digital? The answer: the risk is generational, not immediate. Members aged 25–40 are forming digital habits now. Waiting five years to address that cohort means competing for loyalty that Amazon Prime has already captured.

The core argument

Costco already has every ingredient needed to win online: 81 million loyal members, the most trusted private label in retail, a growing logistics network, and an e-commerce platform that delivered 15.6% annual comp growth in FY2025 without advertising support. The risk to this model is not that digital kills in-store — it is that Costco waits too long and cedes the digital habit to Amazon Prime among the next generation of members. The recommendation is precise: target big-ticket, low-cannibalization categories first; protect the treasure hunt; and finally tell the 81 million members paying annually that the platform exists.

Everyone shops at Costco.Nobody shops Costco online.