One day later the stock dropped 8.5% to close at $165. On June 15th, 2017 the day before AmazonвЂ™s Whole Foods acquisition was announced, Costco stock opened at $180.39. Costco is not only on the defensive technology wise, itвЂ™s in catch-up mode. In an industry where market share is being gobbled up by a noted technology disruptor, itвЂ™s as if Costco has subscribed to the вЂњ IT DoesnвЂ™t MatterвЂќ philosophy. ДЄmazingly, Costco consciously chooses to underinvest in its e-commerce capabilities, which I believe is a disservice to an otherwise strong business model (and the continuing availability of $4.99 rotisserie chickens). In the second quarter of 2017, WalmartвЂ™s e-commerce revenue grew 63% even Target saw a 22% increase as compared to CostcoвЂ™s 11%. CostcoвЂ™s main competitors are devoted to having formidable omni-channel presences which will drive future revenues.

Unfortunately, Costco is a laggard in the technology investment arms race as compared to B2C heavyweights Amazon and Walmart even as e-commerce has captured a larger share of sales industry wide.

The prevailing thought is that Amazon will revolutionize how groceries are purchased. At a minimum, we can expect Whole Foods to adopt best practices and leverage world-class data mining capabilities from the Amazonian fiefdom. We donвЂ™t quite know what Amazon is up to in the grocery sector (and meal kit delivery space), but given its track record of disruption, Costco better start taking up a stronger defensive position to enable long term success. This sentiment has held, but nothing drains a moat faster than when Amazon expands its physical retail presence into your market with a splashy $13.7 billion acquisition (see Whole Foods). Costco offers its loyal shoppers a reason to visit its warehouses replete with low cost bulk items, pharmacies and food courts. The conventional wisdom with respect to Costco is that its business model forms a вЂњdefensive moatвЂќ against the conquering retail army of вЂњHouse BezosвЂќ. Fix the Reset All Filters Button in Tableau

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