Costco goes social to woo millennials

Costco (NASDAQ:COST) is building out e-commerce and adding home delivery to woo millennials, but in-store shoppers are still the retailer's most profitable.

The warehouse club began testing delivery in select markets and growing its presence on social media to attract younger members.

Costco has been adding more products and categories online and launched a test with Google (NASDAQ:GOOG) to offer same-day deliveries of Costco wares in New York, Los Angeles and San Francisco. Recent initiatives to sell club memberships via discount and flash-sales sites including LivingSocial and Zulily are showing early, yet tentative, results in wooing new members.

"You've got a younger member signing up through LivingSocial and Zulily. And it's a relatively attractive cost of acquisition. So we are not going crazy here. We are taking baby steps but some of this stuff works," said Richard Galanti, CFO.

It's a bid to attract younger shoppers, including millennials. Still, Costco's core shopper is older and the in-store shopper more profitable, according to management. Getting shoppers into stores continues to be the priority.

"Clearly gas brings you to the parking lot," said Galanti. "Our fresh foods is a signature category and fresh foods is something, jokes aside, if you like our rotisserie or our meal replacement items or any of those great fresh food items or organic produce, that's the reason for you to come in. If you walk by the sweaters and the batteries and the patio furniture and the activewear, you are going to buy some more stuff.

To that end, Costco plans to open 60 new locations in the first half of fiscal 2014.

For more:
-See this transcript on Seeking Alpha
-See this Bloomberg Businessweek story

Related stories:
Instacart partners with Costco, Kroger to debut Seattle delivery
BJ's Wholesale adds same-day delivery with Instacart
Instacart adds same-day service to D.C. market
Google expands same-day delivery test
Groupon targets Costco and Sam's Club with Groupon Basics

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