Wholesale club giant expands online delivery options
Costco Wholesale Club is upping its home delivery game for online food orders as the grocery delivery market continues to heat up.
The retailer has introduced a new two-day delivery service, called CostcoGrocer, for customers across the U.S. (with the exception of those in Alaska, Hawaii, and Puerto Rico.). The service, which has a fee of $3, offers delivery of non-perishable foods and sundries, with about 500 items available. The delivery fee is waived for orders over $75.
Costco is also expanding its same-day delivery partnership with Instacart to more markets. The program, which includes both dry and fresh foods, is available at some 375 Costco locations. It also is being expanded to include more products.
“There’ll be a number of additional U.S. locations planned – added between now and the end of calendar 2018 as our partnership expands,” Costco CFO Richard Galanti said during the company’s fourth quarter earnings call.
Costco’s moves to expand online delivery come as Walmart and Target are also upping their games. On Oct. 3, Walmart announced it had acquired Parcel Inc., a last-mile delivery startup that specializes in delivery of perishable items and general merchandise to customers in New York City.
Target recently expanded the rollout of its next-day delivery service of household essentials, Target Restock, to eight new markets.
Moody’s: No letup in sight to off-price growth
Off-price retailers will remain among the top performers in the U.S. retail industry during the next 12 to 18 months.
That’s according to a new report from Moody’s Investors Service. The outlook is not as positive for department stores, which will continue to struggle as they seek to level the playing field with both off-price and online vendors.
Moody’s expects operating income in the off-price sector to grow 6.9% in 2017 and 5.4% in 2018. Department stores will see operating income decline 9.3% this year and 2.7% in 2018.
“Off-price retailers continue to outperform other sectors of the U.S. retail industry largely because they offer the kind of lower-cost, higher-value products and shopping experience many consumers are looking for,” said Moody’s analyst, Christina Boni. “Off-price stores are far outstripping department stores, which in contrast are still struggling with outmoded formats and supply chains that can’t keep pace with customer demand.”
The report noted that department stores are mostly taking the right steps to resurrect their businesses, but it’s too early yet to know how well they’ll succeed. In particular, department stores been exploring new ways to drive traffic through e-commerce offerings and partnerships to spur growth. While Kohl’s Corp. has its own online platform, for example, in addition it offers Amazon products at 10 of its stores and accepts Amazon returns at 82 of its locations.
Despite their lack of e-commerce penetration, off-price retailers have succeeded where department stores have foundered due to their focus on delivering major label brands at significant discounts to value-hungry consumers, Moody’s said. Off-price vendors also outperform the broader universe of U.S. apparel-focused retailers.
While apparel sales make up the bulk of their sales, off-price retailers have been increasing their product mix in the higher-growth and less competitive home products category. Moody’s estimates that home product sales at off-price stores grew 9.9% in 2016, compared with 7.8% for the off-price sectors overall growth.
Retailers paying more for holiday help
As the holiday season kicks into gear, retailers' seasonal hiring plans are coming into focus.
Fifty percent retailers are hiring seasonal employees, on par with last year (49%), according to a survey conducted by Harris Poll on behalf of CareerBuilder. Retailers are becoming more competitive in terms of what they are willing to pay seasonal workers. Two-thirds (66%) of retailers who are hiring holiday workers will pay them $10 or more per hour, a big jump from 53% in 2016 and 43% in 2015.
"Our survey is pointing to a significant year-over-year gain in permanent hiring and a smaller boost in seasonal hiring in Q4, though the short-term effects of hurricane damage on the U.S. mainland remain to be seen," said Matt Ferguson, CEO of CareerBuilder and co-author of The Talent Equation. "One of the most telling trends from our research is the fact that many employers are willing to increase pay for both permanent and seasonal staff. This speaks to the sharpening competitive dynamic among employers that we have seen throughout 2017."
The survey also found that the percentage of employers who are transitioning seasonal employees into permanent staff has reached a new high (70%) and has grown at an accelerated rate over the last few years. Looking across industries, 35% of employers are planning to have extra hands on deck to help with increased demands over the holidays, wrap up the year or ramp up for 2018.