Interesting piece from Seeking Alpha suggesting that Walmart may be better positioned to capture millennials' business than Costco.
Here's the logic: "Costco seems to have done little or nothing to adapt to changing realities and attract millennials’ business ... Costco has a limited social media presence and it has few sales channels outside of its club stores to reach millennials where they live."
According to this analysis, things actually get even worse for Costco:
"Millennials prefer to live in urban areas, while a large percentage of Costco stores are located far out in the suburbs ... Costco specializes in selling large amounts of bulk items, but millennials that live in small apartments may not have the room to store all that stuff ... A car is required to reach Costco and haul all that stuff home, but many millennials do not own cars, and some of them do not even drive ... Many millennials simply lack the money needed to shop at Costco because of student loans and income inequality ... A large percentage of millennials seem to have little or no interest in home ownership. Costco's business model is based upon the presumption that its customers will own houses."
As for Walmart...
"Wal-Mart seems to be the only one of the big three retailers that realizes it needs to change its business plan to reach the next generation. CEO Doug McMillon and his team realize that something needs to change if they want to grow. They're also making some very dramatic moves designed to get millennials' business back, including: Accelerating the construction of its small box concept, Wal-Mart Neighborhood Market, with plans to open several hundred of the stores in the next few years ... Expanding its online retail infrastructure to reach millennials at the one place they like to shop online. The retailer has opened two additional 1.2 million square foot fulfillment centers, Tech Crunch reported."
Other millennial-centric options being offered or explored by Walmart include "offering more alternatives to traditional big box retail, including a same day delivery service; offering a free shipping subscription plan called ShippingPass; pick n' pull, the ability to pick up items ordered online at its stores; and experimenting with lockers where customers can pick up online orders."
Here's the logic: "Costco seems to have done little or nothing to adapt to changing realities and attract millennials’ business ... Costco has a limited social media presence and it has few sales channels outside of its club stores to reach millennials where they live."
According to this analysis, things actually get even worse for Costco:
"Millennials prefer to live in urban areas, while a large percentage of Costco stores are located far out in the suburbs ... Costco specializes in selling large amounts of bulk items, but millennials that live in small apartments may not have the room to store all that stuff ... A car is required to reach Costco and haul all that stuff home, but many millennials do not own cars, and some of them do not even drive ... Many millennials simply lack the money needed to shop at Costco because of student loans and income inequality ... A large percentage of millennials seem to have little or no interest in home ownership. Costco's business model is based upon the presumption that its customers will own houses."
As for Walmart...
"Wal-Mart seems to be the only one of the big three retailers that realizes it needs to change its business plan to reach the next generation. CEO Doug McMillon and his team realize that something needs to change if they want to grow. They're also making some very dramatic moves designed to get millennials' business back, including: Accelerating the construction of its small box concept, Wal-Mart Neighborhood Market, with plans to open several hundred of the stores in the next few years ... Expanding its online retail infrastructure to reach millennials at the one place they like to shop online. The retailer has opened two additional 1.2 million square foot fulfillment centers, Tech Crunch reported."
Other millennial-centric options being offered or explored by Walmart include "offering more alternatives to traditional big box retail, including a same day delivery service; offering a free shipping subscription plan called ShippingPass; pick n' pull, the ability to pick up items ordered online at its stores; and experimenting with lockers where customers can pick up online orders."
- KC's View:
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First of all, I think that maybe the author of this analysis is underestimating Costco a bit ... I would be less sure that Costco is not trying to figure out how to adapt its business model for changing generational needs. Though I would agree that Costco would be making a mistake if it just thinks that it continue to do what it has always done and remain relevant.
This is a thought process in which I think every major retailer has to engage. The suburbs are not going to dry up and go away, but there clearly is a shift taking place, and retailers that have dined out on suburban families for decades are going to have to make some different strategic decisions going forward.
