Costco's "Citywide Delivery" Challenges Members' Patience | Business Friday

Text by | Peng Qian

Edited by | Qiao Qian

“Is Costco's city-wide delivery service trying to discourage members?”

Many members showed disappointment after trying out Costco's recently launched city-wide delivery service.

“The fastest delivery in Shanghai is only half a day. I placed an order at 11:30 a.m., and the goods were delivered at 6 p.m. Looking at the delivery route on the map, the driver was going back and forth. In such hot weather recently, there wasn't even an ice pack in the bag. My frozen shrimp had turned red (cooked). Isn't this just wasting food?” Alice, who lives in Changning and drove for over an hour to reach the Costco store in Minhang, Shanghai due to traffic jams, was going to talk to the store staff.

She found that when entering this first offline store of Costco in the Chinese mainland, there was no information related to the delivery service. Even when she went to the store from afar and asked the offline staff, the reply was: “It's not the same system. We're not very clear about the online situation.” However, the online customer service didn't tell her how to return the goods, and the issue of after-sales return was stuck for the moment.

In contrast, Sam's Club's service is much more worry-free. Last Friday, as usual, she bought some frozen products from Sam's Club before getting off work. The “express delivery” only took an hour to reach her home. After work, she decided to play basketball temporarily. When she got home around 11 p.m. that night, the ice packs and frozen food in Sam's Club's insulated bag were still in good condition.

Alice is a typical big-city white-collar worker. She works in a technology company, is extremely lazy, and rarely goes to offline vegetable markets and supermarkets. She usually relies on the delivery services of various apps to get by. For purchasing daily necessities, she has a well - structured shopping list: She buys small portions of vegetables on Hema or Dingdong every day; she uses the Sam's Club app to buy large - portioned baked goods, milk drinks, and snacks once a week; and she drives to the offline Costco store to buy meat and daily necessities once a month.

After being a Costco member for 5 years, she loves the beef, salmon, and the private brand “Kirkland” of this store the most. “The quality of these products is better than similar products at Sam's Club. It's worth making a special trip for them every month.” For her, the fact that Costco finally launched the city-wide delivery service was originally something to be happy about. By paying a 20 - yuan delivery fee, she no longer had to go to the offline store to carry goods every month, saving time and effort. But after the experience, she was quite disappointed. Seeing that her membership was going to expire in 2 months, she began to hesitate whether to renew it.

Compared with its competitors, Costco is indeed lagging behind. This pioneer of the membership - based supermarket that dominates North America is already over 50 years old, but it entered the Chinese mainland relatively late, only 5 years ago, and the city-wide delivery service came even later.

Costco's e - commerce went through a relatively long preparation period. In October 2022, Costco tested the delivery service in Suzhou and later expanded it to other cities in the Yangtze River Delta except Shanghai. However, the delivery and after - sales service completely relied on the third - party company “Tiaotiao Shopping”. Due to the low price transparency and uneven service quality, it didn't last. It was not until last year that Costco began to try self - operated e - commerce and cooperated with SF Express in some aspects. First, it tried delivery within 8 kilometers, and only recently has it expanded to city - wide delivery in major cities.

Costco's self - operated delivery system currently seems to be quite basic. A former Costco China employee told 36Kr that Costco doesn't have a dedicated e - commerce customer service communication platform and after - sales service. For nearby orders, SF Express couriers are used for delivery, while for distant ones, vans from Huolala are used. Often, one van has to carry a lot of goods, and there is only one driver for delivery. Especially since many members like to buy large - sized items like water. In order to save time, the driver can only leave the goods at the entrance of the community for customers to pick up themselves. “Members are also helpless and can only wait for it to improve slowly,” said this former employee.

Sam's Club, also from the United States, entered China earlier, has made deeper progress, and has chosen a suitable local partner. Sam's Club entered China in 1996, started testing e - commerce and launched its app in 2010, and chose to cooperate with JD.com, which has strong delivery capabilities, in 2016. It launched the “1 - hour express delivery” in 2018, which later became one of its trump cards. Through the model of “large stores + cloud warehouses” (front - end warehouses), it began to make efforts both online and offline. In places where there are no large stores, Sam's Club will also set up front - end warehouses first to cover as many people as possible. This largely helped it catch the huge traffic during the epidemic in 2020.

Even Aldi, which opened stores in China in the same year as Costco, achieved city - wide delivery in Shanghai through Ele.me, Meituan, and JD Daojia in 2023. Not to mention Hema and Dingdong Maicai, which are new - generation players. They have always been seizing the market and reshaping consumers' supermarket shopping habits with high - quality instant delivery services.

When “free delivery” and “hour - long delivery” are common among membership supermarkets in China, Costco's “charging a fee even when the 299 - yuan threshold is met” and “the fastest half - day delivery” seem a bit out of place.

According to official information, Costco's delivery service offers four options for different scenarios. For example, “express delivery” is for same - day delivery but requires a 20 - yuan delivery fee; “timed delivery” allows consumers to choose a specific time and also costs 20 yuan; “courier direct delivery” costs 12 yuan and usually delivers the next day or the day after; and “large - item direct delivery” waives the basic delivery fee, but the delivery time is as long as 1 to 5 days.

Costco offers many delivery options, but what members care most about is the experience.

Bob, who has lived in North America, was once a loyal fan of Costco. Going to Costco to “hunt for treasures” every week was a highlight of his ordinary overseas life. “I was recommended a functional juice called DOSE at Costco. It's definitely a miracle drug in North America. It can cure everything from herpes to stomatitis with just one drink.”

After returning to Shenzhen, Bob also became a Costco member. But after experiencing Costco's city - wide delivery, he couldn't help complaining: “I placed an order for delivery at 5 p.m. the next day. But at 4 p.m. that day, Costco shipped the goods and completed the delivery at 5 p.m. The driver called me and said he left the goods on the roadside and told me to pick them up quickly. But I ordered for the next day's delivery (timed delivery). I don't know how they could have such a problem.”

Members pay a 299 - yuan membership fee and a 20 - yuan delivery fee, but what they get in return is last - minute picking by Huolala, thawed frozen food, and no way to get after - sales service. Members are gradually losing patience waiting for it to “improve slowly”.

Looking back 5 years ago, on the opening day of the first Costco store in Minhang, Shanghai, the store had to close due to members scrambling to buy Moutai and luxury bags. The Minhang Police Station in Shanghai even reminded consumers on its official Weibo to shop at off - peak hours to relieve traffic pressure. Many young consumers in Shanghai got an annual Costco membership just for the delicious and cheap fried chicken buckets and hot dogs in the food court. But after the novelty wore off, Costco's slow localization layout is really testing members' patience.

Costco only has 7 stores in China so far, which leads to high delivery costs. That's why Costco still charges members 20 yuan for each delivery order.

Sam's Club's front - end warehouse model is an effective solution right in front of us. It selects high - frequency demand products through front - end warehouses, complementing the stores. Some popular cooked food and large - sized items are not sold online, which also maximally ensures the frequency of members visiting offline stores.

Although it's much slower, Costco has started to consciously use online delivery to open up the situation. This pioneer of membership stores still needs to humble itself and learn from its Chinese counterparts how to do e - commerce well.