Costco Begins Same-Day Delivery Service for Groceries

Costco Wholesale Corp, the huge warehouse chain that is known for its large store format, stations with food samples, and inexpensive pizza and hot dogs, has started a same-day delivery service for groceries using Instacart in hopes of expanding its overall customer base.

The company, which is based in Issaquah, Washington, announced two new options for delivery on Thursday. One is a two-day delivery for its dry goods, while the other is same-day delivery through Instacart the grocery delivery business for orders that have fresh food included in the purchase.

The option of two-day guarantees the deliveries in two business days and is available in just the continental U.S. For orders that are not $75 or more, a delivery fee will be added. Costco said products sold for delivery are higher priced than those same products purchased in stores, but did not say how much more expensive.

The delivery option for same-day is available in the majority of metropolitan areas, and lets customers pick a window of one-hour in which they want their order to arrive. For orders that do not reach $35 or more, a delivery free is charged.

Prices for goods delivered using the same-day option will be between 15% and 17% more expensive than store prices. Costco said a 10% service fee will be added to the total at checkout, although shoppers can elect not to have that service fee.

During its earnings call on Thursday, Costco CFO and executive vice president Richard Galanti said the new delivery options are more of a fill-in, than a replacement. He added that the company has driven its sales with value for years, which he called quality and low price.

However, he did acknowledge that the habits of shoppers were shifting and that customers might not feel it was always necessary to choose their own produce.

Over a period of time, the percentage of fresh products being delivered will change, but how much is something still unknown.

Grocery delivery has become increasingly more important as consumers want to save time and add more convenience, said an industry analyst on Wall Street on Friday.

However, the strength of Costco remains in its warehouse-like store format, which means the two delivery options are just another add on, not necessarily the company pivoting toward just e-commerce, said the analyst.

Offering delivery of groceries is something nearly every other grocer now offers making it another “me too” type program.