Costco’s Digital Revolution
Costco is one of the leading multinational companies, dealing with fast moving products. According to Paromita & Joel (2016, p. 24), this company competes with different businesses in the retail industry, including Walmart, and uses different operational strategies to ensure it attains a competitive advantage. The company deals with a variety of products, including rotisserie chicken prime beef, wine, organic foods among others
According to Jing (2014, p. 77), the digital revolution has seen many businesses realizing different transformations in their operations, some of them being of benefits while others seeming to hurt various organizations. For Costco, digital revolutions have seen the company realize various changes, such as being able to link with consumers in different geographical locations.
However, just like marc Andreessen the founder of Netscape claims in the article “ the future of the retail store-what does online mean for bricks and motor?” going online has made businesses to lose some of the most essential things in their operations. For example, it has limited the social interactions of customers who before the introduction of the online platform used to interact in the stores while waiting to be served. According to Hyma (2015, p. 24), customer interactions are crucial in businesses because it enables organizations to realize large customer turnout because when they meet a particular place and know each other, the chances of revisiting that place are always high.
Although Netscape has various critics on going online, the strategy has enabled Costco to realize various advantages. For instance, it has enabled the company to serve more customers every day as compared to the past. This has been attained through having a platform that helps in connecting the management with customers who are at different geographical locations. Initially, before the introduction of the online operations, the company used to have long queues, which made some of the customers to fail in getting proper services.
In the recent days, this company has realized a significant reduction in operation cost due to the introduction of e-business in its operations. This has been attained through paying fewer salaries as compared to the past where the company required to hire many people to serve the huge number of customers who visited the stores from time to time. As at now, the company requires less number of staff members because most of the activities are undertaken online. Nir (2010, p. 89) asserts that technology plays a key role in making an organization to reduce its operations costs and this has been realized by Costco because most of the operations are done online, meaning the company does not require a lot of workforces.
Advantages of Going Online for Costco
Based on the video, technology has made people to be busy than ever through access to information through their cellphones and therefore retail stores should take this as an advantage. Although Costco has made various steps to make its operations digitized, there are a lot of things that the company need to do to ensure it takes the advantage of digital revolutions. While other retail companies appear to have shifted to online operations, this company seems not to have done much and therefore if it does not optimize its operations using the available digital platforms to minimize the physical purchase, there is a possibility that with time it may lose its market share.
As time goes on, the competition between Costco and other companies that operate in this industry seems to have moved from being physical to online. From the article, Marc Andreessen affirms that shopping is more than convenience and competitive prices. For Costco and other companies, competition through online platforms has been through quality, convenience, and price. In this industry, every company wants to develop the notion that it is the one which gives consumers the value for their money whenever they make purchases through the online platforms. According to Lip-Sam (2011, p. 35), there are many ways of winning competition especially for the companies that operate in competitive markets. For Costco, it should consider doing something unique through its online platforms in order to challenge the key players.
According to Jing (2014, p. 79), Costco has been fast to embrace e-commerce, but with an increase in demand and change in the industry, it has started to view it as one of the factors that can positively influence its business. However, the slow adoption has presented numerous opportunities for this company to thrive. According to Kshema (2016, p. 35), Costco has previously been brick-and-mortar focused, primarily because it trusts that as time goes on, consumers will be purchasing more when they go to a store.
Although this perception has prevented Costco from investing in E-commerce, recently, the company seems to have been on it through establishing new initiatives. Having taking a while before initiating this kind of business seems to have been making it easy for the company to improve in short-term, as there so many opportunities that are still present and ones which according to Jaehun (2015, p. 57) have been giving Costco easy and obvious ways to strengthen its operations through e-commerce.
Challenges of Going Online for Costco
According to Joseph (2010, p. 49), the wholesale retailer has enhanced various offerings with features that are essentially good for e-commerce especially in retail. Although the company has been lagging behind in the implementation of E-business, its strategies of implementing this business have been responding well to the market. According to Mahesh (2010, p. 214), some of the new things which Costco has considered in its new business model include reducing the delivery period to two-days on nonperishable items and doing various changes on its same-day online grocery delivery program.
The retailer has also seen improved results from its E-business marketing through pushing “while supplies last” kinds of promotions that are not radical but new for the company. To attract many customers and also to create awareness concerning the existence of this company, Costco has been using various online platforms especially the social media to advertise some of its products. According to Yessica (2012, p. 56), social media has become one of the most effective tools for advertising because of its ability to connect with many people in different countries. Being a multinational company, Costco has benefited from this platform because it helps one of its subsidiaries to advertise a particular product on behalf of the company. This factor has made the company to realize huge growth in popularity, hence giving it an opportunity to continue growing.
With the increased growth in adoption to the use of smartphones, many people have been connected with not only their colleagues but also with companies that help them attain essential things in their lives Varinder & Brij (2012, p. 46). To make the company remain competitive, this retail giant has come up with an application that enables its consumers to link with the company at their convenience. The application enables them to view products, their prices and also to make purchases. Just like Marc affirms in the article, the introduction of this application and widespread use of smartphones and internet has made most of the Costco customers to believe that they can get anything they want, whenever they want it, wherever they are.
This company has also been using various technological measures to enhance its supply chain. For example, through the use of computers and internet, it has established a channel that enables various people involved in its supply chain to communicate and share some of the things that are essential in ensuring products move from one level to the other. According to Edward (2010, p. 69), communication in the supply chain is crucial because it enables suppliers to communicate efficiently with different people to ensure all processes goes as expected. According to Hussein (2010, p. 57), this company has given tablets to its store associates in about 195 stores to simplify online orders, making omnichannel transactions easier for the company and its consumers.
Costco’s Slow Adoption of E-commerce
Although this company has taken the advantage of online platforms to conduct its operations, there are various things that it seems to have failed to consider in order to ensure it does not engage in some of the things that are likely to impact its operations. For example, with the rampant increase of cybercrime, conducting business through online platforms has been posing risks to businesses because some of the operations can be impacted by intruders through hacking (Stephen 2012, p. 90). In as much as this company is taking the advantage of digital revolution to enhance its business operations, it is also failing to consider some of the risks involved in undertaking businesses through these platforms.
The other factor that his company seems not to consider is that although online operation has various advantages, allowing customers to have physical visits to the stores is good. From the article, Doug affirms that the physical store offers customers experiences and moments to fall in love with the brands offered by an organization. The company seems to have been moving slowly to the adaption of online operations while paying little attention to the importance of customers’ visit to their stores.
While engaging in e-business using various online platforms, organizations that operate in the retail industry have established various measures that enhance customer experience through these platforms. For Costco, various cases have been reported where customers have not been able to login to their accounts due to technical issues. According to Peng & Yijun (2014, p. 58), customers like being associated with organizations that make them realize good experience during purchase. This implies that with the unreliable online platforms, consumers are likely to shift their loyalty from Costco to other companies that give them a good experience.
Conclusion
Although catching up with other seems to have worked for this company, the high demand for online business which has seen more retailers focusing on e-business will require Costco to fully implement this strategy if it wants to avoid falling behind again. Although Doug, from the article, seems to feel that physical purchase is crucial because it offers customers experiences and moments to fall in love with your brand, adapting e-commerce for this business is crucial because in the recent times because consumers have changed their behaviors especially when it comes to traveling to stores to have physical purchase. Heshan (2010, p. 68) asserts that technology has made consumers to feel that traveling to stores to purchase products is wastage of time, and therefore retailers who fail to embrace online business may face various challenges such as loss of market share.
Costco’s New Initiatives for E-commerce
To make the online business safe for this company, it is advisable to ensure that it implements various measures that will enhance the security of not only the company but also for the customers. While purchasing, customers leave some of the important details such as their address, phone numbers, names and so forth (Liang & Clyde 2013, p. 69). If this information is attained by third parties through hacking and other forms of cybercrime, they can be used to harm the customers in various ways. Additionally, lack of proper security measures can make the company to lose a lot of money due to cybercrime, and therefore it is essential to ensure that its online platforms are secured with security measures that can challenge intruders.
Although slow adoption of E-commerce has enabled this company to realize various advantages, it is essential to speed up the process because based on the video, e-business is becoming a necessary component for retailers especially in Australia because consumers have shifted from physical visit to the stores products to ordering products through online platforms and letting the company to deliver them at the comfort of their houses. This implies that if Costco fails to fully embrace this strategy, there is a possibility that it will be challenged by other companies that have realized the importance of e-business in their operations.
From this analysis, it is clear that although Doug from the article affirms that being brick and motor has various advantages, there are numerous reasons why Costco should fully adopt e-commerce in its operations. One of the key benefits is that it will strengthen its competitive power by adapting the changes in consumer buying behavior. Focusing on a physical purchase may have various advantages such as promoting social interaction of consumers but may make the company to loss its market share to companies that have embraced e-commerce in their operations.
Although Costco has been lagging behind in establishing e-commerce, it has realized its advantages and recently it has been making huge strides to embrace it in its operations. For instance, it has established an online platform that enables its consumers to order products and have them delivered to their homes. The company has also reduced delivery time for some products and used the online platforms to enhance its supply chain and marketing.
References
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