Costco chases online sales

SEATTLE – It’s a curiosity of how the Internet works that a shopper using a search engine to find a flat-screen TV probably will not turn up Costco Wholesale, a major television vendor and the country’s largest retailer after Wal-Mart.

<p>Costco.com is not built to attract online hits, but it does decent business – about $2 billion in sales a year. It does so by offering everything from caskets to an 18.88-carat diamond, while attracting customers even more affluent than the average shopper at its warehouses.

Now the chain – based in Issaquah, Wash., less than 20 miles from the offices of online Bigfoot Amazon.com Inc. – wants to up its game online, and experts say it’s about time.

<p>Costco.com hopes to launch mobile applications for Apple and Android this month, grow internationally in the coming year and improve its ranking in online searches.

“The stakes are very high,” said Vladimir Zwass, a computer-science professor at Fairleigh Dickinson University in Madison, N.J., and editor-in-chief of the International Journal of Electronic Commerce. “The growth of e-tail is far sharper than the growth of retail in general, and sooner or later those companies will simply eat Costco’s lunch.”

Currently, Costco.com ranks 17th among online retailers. Amazon ranks first and Wal-Mart fourth – and both are growing faster than Costco, according to the trade publication Internet Retailer.

“A lot of other chain retailers, including Wal-Mart, are doing things sooner, better and quicker, including going international,” said Mark Brohan, director of research for the publication.

Ginnie Roeglin, senior vice president of Costco’s e-commerce and publishing operations, said the chain does not appear in searches partly because “we don’t advertise and we don’t pay for search. We’re moving to a new platform that will be structured in a way to be picked up by search engines.”

Mobile apps are key, because they make shopping easier for customers who are increasingly – and constantly – connected, according to Zwass, the computer-science professor. He also sees social networking as important, particularly for a popular brand such as Costco.

Roeglin said the chain is exploring social media but has not dedicated much money or other resources to it, because it is focused on Costco’s core business and keeping costs down.

Holding down expenses is one reason Costco.com has been profitable since its first year in business, a rarity in online retailing.

The chain went online in November 1998, three years after Amazon. Its average sale is higher than at a Costco warehouse, Roeglin said, and many of its shoppers are Costco’s executive or business members – a fairly affluent group.

Costco sells online only in the United States and Canada for now, but hopes to expand to other countries in the coming year.

Nonmembers must pay a 5 percent fee to buy from Costco online. That means an expensive enough purchase could make the $55 standard membership fee worth the investment.

More than half of Costco’s 23 million U.S. households have registered with Costco.com and receive email alerts about special offers on the website. Many have bought online, too, “but not as frequently as with a warehouse, because we don’t sell food,” Roeglin said.

Still, surveys indicate a lot of members don’t know that the online store carries items not found in a warehouse and that the email specials they receive are unique to Costco.com, Roeglin said. “We have more work to do making members aware of the fact that it’s an additional selection online,” she said.

Costco officials won’t talk about particulars of their online upgrade, but the field of “search-engine optimization” – the technical process of tailoring a website so that it appears high in search results – has lots of consultants and one of the best known, Chris Silver Smith, of Dallas, found plenty wrong with Costco’s website.