Costco Wholesale is on a roll. The company’s relative visit share within the superstore space has steadily grown over the past couple years, and the wholesale club led its category in terms of year-over-year (YoY) visit growth during the recent Back-to-School season. With the holiday season around the corner, we dove into recent visitation metrics to better understand the chain’s current strength.
Costco Outperforming the Wider Industry
Costco seems to have recovered from the headwinds facing the wider retail space earlier in 2023, with monthly visits to the wholesale giant up between June and August 2023 up relative to the equivalent months in 2022. And while some of the growth in foot traffic is due to the company’s ongoing expansion, same-store visits are also on the rise with average visits per venue metrics seeing increases year-over-year (YoY) between June and August 2023 as well.
Costco’s ability to open new stores without cannibalizing traffic from its existing venues speaks to the strong demand for the concept – and suggests that the chain has not yet maximized its expansion potential.
Where is Costco Growing the Most?
As of August 2022, California, Texas, and Washington had the highest number of Costco warehouses. But the company operates in almost all 50 states, and analyzing foot traffic to Costco locations on a statewide basis reveals that Costco is seeing the most growth outside of its three largest markets.
Between January and August 2023, Costco nationwide saw a YoY increase of 1.9% in overall visits, while average visits per venue stayed relatively stable. During that same period, the chain underperformed its nationwide benchmark in California, Texas, and Washington in terms of both YoY overall visits and average visits per venue. The retailer still performed well in these states – overall Costco visits still grew in Washington and Texas, and remained relatively stable in California. But the data could indicate that Costco may be starting to hit its saturation point in its three largest markets. At the same time, the foot traffic metrics also show that Costco can grow its footprint in already strong markets while seeing only a slight dip in average visits per venue – so demand in these states may be strong enough to support a larger store fleet with minimal impact on existing stores.
Meanwhile, Costco in its fourth, fifth, and sixth largest markets – Florida, Illinois, and New Jersey – outperformed its nationwide benchmark. In New Jersey and Illinois in particular – where the chain does not seem to have opened new venues recently – January to August 2023 visits (and average visits per venue) increased by 6.0% and 4.9%, respectively, relative to the same period in 2022. So Costco may have even more room for expansion beyond its three largest markets.
Costco Goes Back to School
Costco emerged as a back-to-school powerhouse this year, and comparing 2023 and 2022 Costco visitor behavior further showcases the chain’s growing back-to-school clout. During the first half of 2023, Costco visitors followed wider industry patterns as they returned to mission-driven shopping behavior – consolidating shopping trips, likely in an effort to save money, as reflected in a drop in visits alongside an increase in dwell time. So between January and June 2023, the median length of a Costco visit increased relative to the same period in 2022, while the share of returning visitors (shoppers visited Costco twice or more in a two month period) decreased.
But during July and August 2023, the share of returning visitors actually increased relative to 2022 – growing from 52.9% to 54.1%. Meanwhile, the median dwell time remained constant at 37 minutes, the longest median dwell time seen all year. It seems, then, that Costco shoppers were willing to ditch their thrifty habits and visit their local warehouse as many times as – and for however long – it took to find the perfect backpack or megapack of lunchbox snacks.
Costco’s Future is Looking Bright
Costco serves a relatively high-income clientele, so the superstore has been less affected by the ongoing economic headwinds than some of its peers. Still, the company’s continued growth amidst a difficult consumer climate suggests that the company is well positioned to continue thriving in H2 2023 and beyond.
For more data-driven retail insights, visit placer.ai/blog.