Costco outsources its last mile to DoorDash and Uber

Costco runs its merchandise business at break-even by design, and most years the membership fee line is roughly the whole of net income ^[7]. A last-mile network the company owned would be charged against that fee pool, or against the prices the fees exist to protect ^[19]. It contracted the capacity instead, adding DoorDash last week and extending Uber substantially, on top of the Instacart relationship that had carried most of its same-day orders ^[1][3]. Fortune did not report the commercial terms of either deal ^[20].

Some of that is the assortment: a Costco warehouse stocks about 4,000 items against 100,000 at a Walmart, 25 times as many, and that short list is what gives Costco leverage over vendors on price ^[8][14]. What does move is bulky. Fortune notes that deliveries from the warehouse clubs are heavy enough that Costco and Sam's Club steer members toward curbside wherever they can ^[10]. A 4,000-item list would not keep a dedicated parcel fleet busy the way 100,000 might ^[8].

"E-commerce is important to Costco, but it's not the be-all and end-all in the way it is for some businesses. Costco is also quite well differentiated so while it does compete with Amazon and Walmart, it isn't quite as involved in the digital grocery battle that those two are fighting," said Neil Saunders, managing director of GlobalData ^[6].

Renewals ran at 92.3% across the US and Canada last year ^[4], and net sales for the fiscal year ended in August reached $297.3 billion, nearly triple where they stood a decade ago ^[5]. That implies a base a little above $99 billion ten years back ^[18].

The same results argue the other way too: digitally enabled sales rose 20.9% last fiscal year while companywide comparable sales rose 8.4%, about two and a half times the rate and 12.5 points clear of it ^[11][16][17]. Costco treats e-commerce as essential to signing up younger members, and a degree of delivery convenience as table stakes ^[13]. Chief executive Ron Vachris told Fortune in 2024 that e-commerce is a priority and that growing online sales would not come at the expense of the in-store experience ^[12].

In my view a retailer whose profit is a subscription fee should buy delivery by the order and leave the fixed cost with Walmart, Target and Amazon, which are building their own ^[9]. The counter-thesis is specific: if convenience is what converts a 30-year-old into a member ^[13], then Costco has put its member-acquisition channel on service levels set by DoorDash, Uber and Instacart, and it cannot tune them. The renewal line would settle it. If 92.3% drifts down while digital keeps compounding well above the company comp, Costco bought too little convenience too late ^[4][11]. The 7.7% who did not renew last year is the population where that shows up first ^[15].