Costco’s decision to extend shopping hours for executive members is looking more and more like a smart move.
When the wholesale club said earlier this summer that it would make the change — without adding new staff, to boot — some workers expressed concern that the strategy would backfire.
But foot traffic data from Placer.ai indicates the adjustment is helping the company accomplish several key goals, namely getting shoppers to visit more quickly and more often.
“People realize they have more time now and potentially don’t need to get everything in that visit,” Placer.ai analyst RJ Hottovy told Business Insider.
“It’s early, but I do think this is a win,” he said.
The data shows small but meaningful shifts in foot traffic from the 10 a.m. and 11 a.m. hours to the 9 a.m. hour during July and August, the first months that the new schedule took effect.
Costco’s fiscal year ended on August 31, and its fourth-quarter results will be the first indication of the financial impact of the additional hours. The company reports earnings on Thursday, and analysts have said they expect the extended hours to be “accretive” to the company’s already healthy sales growth this year.
Placer.ai said the more balanced flow of foot traffic from the extended hours likely improved the shopping experience for all shoppers, regardless of their membership tier.
Costco shoppers are also making shorter trips to the warehouse, Hottovy said, with hourlong visits shifting toward 30-to 45-minute ones.
Although most retailers like it when shoppers linger in stores and load up their carts, Hottovy said the shorter trips actually lead to additional visits that ultimately add up to a longer total average time in-store each month.
“It does end up driving incremental visits, because people can feel like, ‘Oh, I know. I can get in and out quickly now,'” he said.
Costco is testing several approaches to deal with increasingly busy stores
The additional hour is one of the most visible initiatives that CEO Ron Vachris has said Costco is testing to deal with its crowding challenges.
One approach Vachris highlighted recently was a form of “scan and go, done by Costco.” He didn’t explain how it worked, but Business Insider observed store workers at a Maryland location this month using a tablet to scan items in waiting shoppers’ carts to be paid for when they reached the register.
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Indeed, Placer.ai’s data also shows how much busier warehouses have gotten in recent years.
Costco has seen same-store visits increase for 17 straight quarters, meaning there are simply a lot more shoppers now than there were a few years ago — and it’s not like the warehouses or parking lots have gotten significantly bigger.
“The whole category continues to do well,” Hottovy said of club stores.
And unlike Walmart, which says it is attracting new higher-income shoppers, Hottovy said Costco’s customer base is showing a slight decrease in average income, which is counterintuitively good for the company.
“They’re picking up what we believe to be younger consumers — younger millennial and Gen Z customers that are starting families — it seems to be one of the areas of growth here for this company,” he said.
Those new shoppers could wind up being long-term members, Hottovy said.
One question the foot traffic data can’t answer is how many members have opted to upgrade from Gold Star to Executive in order to take advantage of the new perk — a change that basically doubles fee revenue from those members.
Costco’s earnings call on Thursday could offer more clues about the growth of its membership tiers.
