Dive Brief:
- Costco Wholesale locations that are adopting pre-scan technology have seen checkout speeds increased by 20%, CEO Ron Vachris said on the company’s earnings call Thursday. The CEO also noted some of the digital changes that were coming to the company, including using AI to compare prescription drug pricing across vendors and autonomously reorder inventory.
- “In the warehouse implementation of scanning memberships at entry, the Costco Digital Wallet and pre-scanning small- to medium-sized baskets is leading to better member experience and improved productivity,” Vachris said, adding that the company’s approach is not “technology for technology’s sake” but rather that the club retailer is using tech to improve its operational efficiency.
- While discussing SG&A, CFO Gary Millerchip said the productivity and efficiency benefits from tech investments described by Vachris “fully offset wage investments and the impact of extended operating hours and would have created positive leverage in the quarter had we not experienced higher health care costs.”
Dive Insight:
The Issaquah, Washington-based retail giant reported net sales for the first fiscal quarter ended Nov. 23 rose 8.2% to $65.98 billion, while selling, general and administrative costs rose to $6.3 billion in the period from $5.84 billion.
“Our reported SG&A rate was higher or worse year-over-year by 1 basis point, coming in at 9.6% compared to last year's 9.59%,” Millerchip said according to a transcript of the call. “The operations component of SG&A was higher or worse by 1 basis point. Our operators did a great job improving productivity and capturing efficiency benefits from the technology investments that Ron referenced earlier.”
While Costco has drawn some criticism for its long check-out lines, it has been testing out a “scan-and-go” system similar to its competitor Sam’s Club which lets customers scan items with their phones and pay through an app, Food & Wine reported.
On the AI side, Vachris said it also is in the process of deploying AI in its gas business for inventory management. An analyst on the call noted that the market has observed that under Vachris’ tenure the company has been more willing to embrace technology, asking Vachris whether he agreed with that view.
Vachris did not directly answer the question, noting that technology had been a focus for the company for several years.
“So we're now coming to a fruition where we're starting to see the benefits of that hard work of all the backroom systems that we had to build that are now coming to light and coming to the front phase for our members. We feel that technology is going to be part of the — [a] big part of our future,” Vachris said.
