As of August 4th, 2017 the stock trades at $156.44 representing a 13.2% drop from June 15th. One day later the stock dropped 8.5% to close at $165. On June 15th, 2017 the day before Amazon’s Whole Foods acquisition was announced, Costco stock opened at $180.39. Costco is not only on the defensive technology wise, it’s in catch-up mode. In an industry where market share is being gobbled up by a noted technology disruptor, it’s as if Costco has subscribed to the “ IT Doesn’t Matter” philosophy. Īmazingly, Costco consciously chooses to underinvest in its e-commerce capabilities, which I believe is a disservice to an otherwise strong business model (and the continuing availability of $4.99 rotisserie chickens). In the second quarter of 2017, Walmart’s e-commerce revenue grew 63% even Target saw a 22% increase as compared to Costco’s 11%. Costco’s main competitors are devoted to having formidable omni-channel presences which will drive future revenues. Unfortunately, Costco is a laggard in the technology investment arms race as compared to B2C heavyweights Amazon and Walmart even as e-commerce has captured a larger share of sales industry wide. The prevailing thought is that Amazon will revolutionize how groceries are purchased. At a minimum, we can expect Whole Foods to adopt best practices and leverage world-class data mining capabilities from the Amazonian fiefdom. We don’t quite know what Amazon is up to in the grocery sector (and meal kit delivery space), but given its track record of disruption, Costco better start taking up a stronger defensive position to enable long term success. This sentiment has held, but nothing drains a moat faster than when Amazon expands its physical retail presence into your market with a splashy $13.7 billion acquisition (see Whole Foods). Costco offers its loyal shoppers a reason to visit its warehouses replete with low cost bulk items, pharmacies and food courts. The conventional wisdom with respect to Costco is that its business model forms a “defensive moat” against the conquering retail army of “House Bezos”. Fix the Reset All Filters Button in Tableau
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