Costco: 10% more expensive, 2 days slower than Amazon (plus Costco highlighted terrible reviews)

"Dramatic" is the best way to describe the differences between Costco and Amazon. Pricing, speed, and quality are all immediate reputation risks for Costco.com.

My wife, a 15+ year Costco loyalist, takes me to Costco every two weeks ... for a few hours each time. We load up on big tubs of household products. Great deals in her mind. I lug them into our home for storage.

My wife was shocked this weekend by this comparison we did of private label batteries: Kirkland versus AmazonBasics. Granted, this example just involves batteries. But, now she wonders IF Costco really has the best price, if it's worth taking that 3-hour weekend trip to Costco, and if it's worth heaving those heavy "value-packs" into our car and then into our house (versus opting for Amazon 1-day deliveries). After making a comparison, it's no wonder why Amazon's market share and private label revenues are skyrocketing.

Imagine the damage being done to Costco's brand as 1,000s of shoppers make these ad hoc comparisons (detailed below). Costco to Amazon. Kirkland compared to AmazonBasics.

Both companies are headquartered in Seattle, but the contrasts between the two companies are plentiful. Pricing, product information, and speed-of-delivery all motivated us to buy Amazon batteries. And they have my wife asking more about Amazon's subscription services.

As Amazon whacks up to 43% off WholeFoods prices (yesterday it happened), this topic becomes relevant to companies beyond Costco. As do Costco's stark and barren product detail pages.

When shoppers see price discrepancies like this unfold (as my wife and I did with batteries), they expect similar results in other categories like vitamins, apparel, groceries, sporting goods, and footwear. But, this discussion extends far beyond price into other areas that influence consumer relationships and trust.

AMAZON: 10% CHEAPER, 2X FASTER, 3X BETTER RATING THAN COSTCO

Again, I ran out of batteries this weekend, so my wife and I went online. We discovered that AmazonBasics AA's were 25c per unit ...

... while Kirkland's were 27.7c. Okay? Or not?

On the topic of price, Costco may not have many places to turn because Costco doesn't have tools like Amazon's AWS for producing supplemental margins.

But, beyond the 10% price difference, my wife and I ran into a few more snags which can be fixed by embracing low-cost Open Innovation and the startup community:

• Amazon's private label AA Batteries had 15,163 reviews compared to Costco's 23
• Amazon's product ratings were about 4.4 while Costco Kirkland AAs were 1.5
• Amazon's product detail page (PDP) told us everything we ever wanted to know (and more) about batteries. You'll see compare/contrast screenshots below. Amazon provided videos and answers to 163 consumer-driven FAQs (in addition to the 15,163 product reviews). Amazon's PDP also gave us dozens of alternatives battery choices. While we didn't read hardly any information on Amazon's PDP, Amazon inspired confidence. In the case of Costco, product information was missing. The "vitual shelf" looked barren and stark. Costco didn't have video explanations. Costco lacked substantial authenticity -- minimalistic product reviews and ratings. No Q&A. Thankfully, for Costco, Costco could rest on its laurels for a while because long-time customer/Members have granted Costco a little room to coast. But, as more consumers make comparisons and as Costco tries to acquire new Members, Costco's barren PDP simply highlighted Kirkland's terrible ratings and reviews. Long-term -- this lack of "product love" will haunt the Costco brand (read this Inc. article written Aug 21, 2017: "New Research Shows a Good Brand Website Is More Important Than Ever" ... The majority of consumers prefer to shop or do research on a brand's site for products they consider buying.)

• Even though both retailers offered free shipping, Amazon promised to deliver to our home 1 to 3 days faster. Costco's "promise" was nebulous. "Likely to get there in roughly 3 to 5 business days.

This Costco battery example illustrates a few problems all retailers need to tackle proactively. Speed-of-delivery, pricing, and product detail pages need to meet new consumer expectations. Retailers can't lag. Expectations are evolving at the rate of product introductions like Echo Show, the Dash Wand and at the speed-of-startups ... simply because it's easier than ever to innovate (as Forrester pointed out in 2011):

Unfortunately, as Scott Brinker shows us below (below), many companies like Costco (it seems) still behave as if the rate of change is linear (old paradigm).

It's not 1994, 1999, 2010, or even 2015 anymore.

There is an answer to these Costco-type situations. Companies like Costco can embrace the startup ecosystem, innovation workflow services like Iterate.ai, and a philosophy of Open Innovation (as Amazon does for crowdsourcing scripts, products, and software).

Enterprises provide muscle; Startups provide spark

I don't mean to minimize the importance Enterprise invention machine. But, we also know that Startups are inventing as fast as Amazon and Google (which is why Amazon and Google each aquire between 6 and 25 startups per year). Today, Startups need Enterprise, just like Enterprises need startups.

In the long run, what's at stake here is Costco's brand. Costco's brand promise (What is Costco?). Costco's reputation. Same will be true for grocers and drug stores as Amazon rolls out their WholeFoods strategy.

PRODUCT DETAIL PAGES (PDPs) UNDER SCRUTINY

Now, look at the stark differences between the Amazon and Costco PDPs (below). I've included both so you can see what I saw while shopping. For Costco, there isn't much to show -- but much of this can be fixed (fast):

If you click on Specifications, nothing is there. If you click on Reviews (23), this is the first one you see:

Enough on Costco. Granted, I only looked at batteries, but still, there are lessons for all of us my battery shopping experience.

Showing Amazon's PDP requires five graphics.

PART 1 of 5 - Amazon's PDP

Below is the top of Amazon's PDP for AmazonBasics private label AA batteries. Look hard at these graphics. Sharp contrasts between Costco and Amazon exist. Amazon shows the unit / price count, customer answers, subscriptions, add-on products, subscription options, Dash options. Costco has none of that.

Open Innovation and embracing the startup ecosystem could solve many of these discrepancies for non-Amazon retailers.

PART 2 of 5 - Amazon's PDP

The Amazon PDP continues ... showing optionality and product benefits. On the graphic below, notice the 75 pages of scrolling advertisements -- another source of Amazon revenues -- and another Open Innovation opportunity for other retailers. Amazon isn't afraid to show competitor products. In fact, they may help sell AmazonBasics after comparisons are made.

PART 3 of 5 - Amazon's PDP

Now Amazon gives consumers a product comparison chart. This helps an uncertain shopper feel good about the decision making process.

PART 4 of 5 - Amazon PDP

The PDP keeps going ... for shoppers wanting to understand more product benefits. More detail. (Remember -- this is for AA batteries that retail for 25c each.)

PART 5 of 5 - Amazon PDP

Here, Amazon kicks off the Q&A and product reviews. Shoppers have asked 162 questions about AmazonBasics batteries! Remember, Costco Kirkland had 23 reviews and no Q&A. For retailers lacking these features, Open Innovation and the startup ecosystem could help immediately.

Did you notice (above) the 15,100 product reviews? Amazon makes a point of showing you the good and the bad. Full disclosure, front and center. Did you notice the images loaded by customers? ON BATTERIES?

The info keeps coming. By the time you get to the bottom of the page, Amazon offers you other shopping alternatives.

Comscore states that Amazon is the #1 brand for Millennials. And, the PDP shows a few ingredients the Millennial must value. Amazon's App, according to Comscore and published in Business Insider, is the one essential Millennial App:

In addition, Millennials are using online tools more than in prior years and far more than their parents. (This is according to a survey done by FMI U.S. Grocery Shopping Trends, 2017.) As Amazon and others push our digital limits and leverage outlets like Whole Foods as distribution hubs, expect this popularity and these usage habits to grow.

AMAZON SELLS KIRKLAND BETTER THAN COSTCO?

Turns out that Costco.com is not the #1 seller of Kirkland. According to Digital Commerce 360, Amazon is. It's probably because of the superior digital experience offered by Amazon.

Ironically, Amazon uses Kirkland to cross-sell into AmazonBasics:

Despite the cross-sell, on Kirkland products Amazon produces better conversion rates than Costco too, according to Digital Commerce 360.

Amazon private label will gain steam (lots of it). Costco is helping the cause. And the Amazon price cuts will continue at WholeFoods and with Amazon Private Label, as they have with S3 and AWS. Bloomberg and the Chicago Sun Times both reported "phase 1" of Whole Foods cuts yesterday:

Amazon Cuts Whole Foods Prices as Much as 43% on First Day

MY SIMPLE SUGGESTIONS:

If I were Costco or any other retailer, worst case, I'd make sure my brand provides consumers and guests with an on-par experience. Provide shoppers with an equal level wisdom and intimacy ... equal to consumers' evolving expectations which are shaped by Amazon, Google, and Facebook in today's fast paced digital world.

PAY ATTENTION TO WEB and MOBILE:

Millennials are using the Web and mobile to shop more and more as shopping tools become better. Retailers need Omni-channel, yes, for sure. Just don't neglect your other core digital shopping tools (including Web and mobile).

DELETE PRODUCTS:

Watch your products reviews. If a product gets bad reviews (like the Kirkland AA battery), delete it.

PRESENTATION OF PRODUCTS:

Leverage startups to fill in your blanks. They can easily add missing (important) features to your presentation. Present your products as if you love them. After all, it's what you do -- help consumers make good decisions on products.

Use services like Iterate.ai to help put an elegant startup ecosystem process in place. A process that discovers, curates, and grades startups -- in service of your customer journeys. Also, use services like Iterate to run rapid experiments. The startup ecosystem moves fast. Their technologies are often ahead of the curve. For years now, startups have offered retailers with Dash-solutions, Dash Wand-solutions, Q&A software, AI-based recommendation engines and many other features that consumers have come to value (if not require) -- thanks to Amazon, Netflix, Google, and Facebook.

PRICING:

Don't allow large pricing discrepancies to embarrass you and cause shoppers like my wife to stop trusting your brand. This means every retailer needs a location-based market vigilance to create awareness and responsiveness.

START THINKING IoT + PLP:

That's the topic of my next Linkedin post. IoT plays big-time into Amazon's private label strategy and every retailer needs to understand this. I think Amazon's approach to private label is dramatically different from what retailers and brands have all become accustomed to before 2007.

Send me your thoughts if you'd like. THANKS! [email protected]