Taking stock of Costco’s COVID-19 customer service

Amid COVID-19 retail carnage, Costco is managing to weather the storm well so far according to recent stock reports and recommendations. Its legendary customer service likely is leading the pack of positives.

Whether or not such pandemic-related policies as mandatory masks and special hours from 9-10 AM Monday-Friday for seniors and shoppers with disabilities or immune challenges will help or hinder the bottom line is a story that will reveal itself over time.

On July 23, investorplace.com reported: “Shares of Costco Wholesale (NASDAQ:COST) have broken out to new highs, as investors pile into this best-in-class retailer…In a world where the novel coronavirus is disrupting the entire economy, the retail sector is made up of the haves and the have-nots. Fortunately for investors, Costco stock is among the former…Analysts expect 7.3% revenue growth this year and 6.3% growth next year. On the earnings front, consensus estimates call for 3.2% growth this year and an acceleration up to 10.1% growth in 2021…In other words? Even a pandemic couldn’t really disrupt Costco. The fundamentals are there, as are the technicals. Bulls are in control for now.”

A week earlier, The Motley Fool pointed out: “Forget Target: Costco Is the Better Recession-Resistant Stock…If you’re a defensive investor afraid of a lingering recession, two strong choices to park your investment dollars may be the consumer staples sector, or better yet, the big, financially strong retailers that offer a wide variety of staples that consumers need in good times and bad…When assessing how both Target and Costco would perform in a recession — especially one caused by a pandemic — look no further than each company’s recent quarter, which ended in early May and therefore had about two months of COVID-19 impact…At first glance, it may seem that Target had the better COVID-19 quarter…However, the bottom lines tell a different story, with Costco’s operating income increasing 5% to $1.18 billion, while Target’s operating income plunged 58.7%, from $1.14 billion to just $468 million in Q1.”

According to the article, the earnings divergence ties to different business models, with about 70% of Costco’s operating income coming from membership fees, “which don’t fluctuate with however much of a specific item it sells that month.”

Membership renewals over the course of the coming months, coupled with new memberships and shopping revenues, will help determine how well customers feel the company is doing in meeting their needs as the pandemic, and attendant policies and measures, continue. According to investorplace.com, “With a 90% renewal rate, investors have come to depend on this high-margin cash flow unit, which allows Costco to operate from a position of strength.” 

Another measure of customer satisfaction will be how employees view their employer as more time passes . By extension, a happy and loyal workforce translates into making sure customers are happy, too.

It will be interesting to see how Costco and its competitors fare going forward, and the reasons behind positive or negative business reports.

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Customer service isn’t one-size-fits-all. While there are some policies that merit universal application, such as listening to and acting upon customer concerns in a caring and substantive way, preferences can vary considerably. What do companies do to best identify what most customers want and expect, understanding that not everyone will be happy?

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Mark Lusky | 303.621.6136 | mark@marklusky.com

Veteran writer, storyteller and author, with 40+ years of public relations, advertising, marketing and journalism experience. Author of A Wandering Wondering Jew… and co-author of Don’t Get Mad, Get Leverage. Mark (aka The Happy Curmudgeon) is the owner of a Denver-based marketing communications firm.