Costco quietly makes payment change members will love

Costco never adapts new technology quickly. The warehouse club lets its rivals be the innovators that push boundaries.

Then, once a technology has been proven out, Costco (COST) consider whether it makes sense to add it.

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It’s a slow and steady approach that allows the company to embrace change without having to spend money on losing ventures. By the time Costco adds something new its value has been proven out elsewhere.

That’s why the chain was slow to offer direct sales on its website and why it still does not use robots or other gimmicks in its warehouses. If a technology has not become mainstream, it’s very unlikely that Costco will use it.

Innovation comes slowly for the membership-based warehouse club, but it does happen. That includes some recent changes that benefit members.

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“We continue to make progress with our technology road map. The new warehouse tool in our app, which allows members to view local warehouse item availability and prices had over 43 million visits,” CFO Gary Millerchip shared during the chain’s second quarter earnings call.

Costco admits it has work to do

While Costco takes a slow and steady approach to digital transformation, it has been working to improve the overall customer experience.

“We still have a lot of work to do in this area and are excited about the potential to improve the member experience through more relevant targeted messages and experiences,” he added.

The chain also recently gave members a new payment option. 

Costco has added Affirm as a pay-over-time option for some purchases.

“Split large purchases into smaller payments Choose a monthly payment option from Affirm for your online orders of $500 or more,” the warehouse club shared on its website.

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Affirm allows users to pick their payment terms and how much interest they end up paying. It’s a simple technology that many other retailers and travel service providers have already adopted.

Costco does not have to explain how Affirm works to most members because they have already seen it (and maybe used it) elsewhere. The warehouse club shared the steps to use Affirm on its website:

• Add $500 or more of eligible products to your Costco.com cart
• Select Affirm as your payment method at checkout on Costco.com
• Enter a few pieces of information for an real-time decision. This won’t affect your credit.
• Pick a payment plan: Pay in 3-36 monthly payments. Rates are between 10-36% APR.

Costco makes more changes

Millerchip also spoke about two other changes Costco made that its members will like.

“And Costco Next, our curated marketplace also had record holiday sales. We are now approaching 100 vendor sites and significantly grew average order value in the quarter,” he shared. 

The chain also made a change that directly impacts its members’ bottom line.

“Last quarter, we increased the reward on gas purchases at Costco locations to 5%,” he added.

Those changes have helped Costco continue to grow its sales. 

“Turning now to our February sales results for the four weeks ended this past Sunday, March 2nd, compared to the same four retail calendar weeks last year. Net sales for the month of February came in at $19.81 billion, an increase of 8.8% from $18.21 billion last year,” Millerchip shared.

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The chain excelled at pretty much every metric it shared, except for international sales.

“Comparable sales for the month were as follows: U.S. comparable sales were up 8.6%, both with and without gas deflation. Canada comp sales were up 3.2% or 8.7% adjusted for gas deflation and FX. Other international comp sales were down 0.6% or up 6.5% adjusted,” he added. “This resulted in total company comp sales of 6.5% or 8.3% adjusted for gas deflation and FX.”

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