Costco makes key changes to fix checkout pain points

Retail checkout has become a pain point for many chains. Target and Walmart, for example, have both struggled with how to integrate self-checkout versus traditional manned checkout.

Consumers are divided when it comes to self versus traditional checkout, according to the first Digital Commerce Index from NCR Voyix Corp.

• 43% of consumers expressed a preference for self checkout over traditional checkout.
• A generational snapshot of responses from the index indicates that 53% of younger shoppers ages 18 to 44 prefer self-checkout.
• Of those consumers who prefer self-checkout, speed, shorter lines, and privacy are most important. Shoppers aged 45 to 60 and older prefer traditional checkout, but the top reason behind their choice is that they often have many products to check out.

Costco has generally used a traditional checkout system, although it has tested self-checkout. Now, the chain has decided to invest in its checkout experience both in its stores and on its website.

Costco makes checkout changes

Costco has always focused on value and pricing over everything else. Now, the chain has decided to focus on member experience, according to CFO Gary Millerchip.

"In digital, we continue to make strides with our roadmap to deliver a more seamless experience for members in warehouse and online. In the warehouses, we are achieving meaningful improvements in the speed of checkout and employee productivity, both as a result of our mobile wallet enhancements, pharmacy pay ahead, and the rollout of employee pre-scan technology," he said during the chain's second-quarter earnings call.

Pre-scan involves store employees coming into the line and scanning items to make the final checkout process. Millerchip said the changes won't stop there.

"We are also piloting automated pay stations that will allow members to pay for their pre-scan orders seamlessly with an average transaction time of around eight seconds. Early results show this is improving the flow of traffic, and we have received great member feedback," he added.

Related: History of Costco: Company timeline and facts

Costco has also made digital investments

"On our digital sites, we continue to roll out new personalization capabilities, which are resonating well with our members and are starting to have measurable impact on ecommerce sales growth. As consumers embrace AI in their shopping habits, we believe our commitments to providing the best value on great quality items can make us a beneficiary of these shifts," Millerchip shared.

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Focusing on digital marks a change for Costco.

"Costco's strategy has long centered around driving members to its stores rather than making it convenient for them to shop online. Unlike Walmart and Target, Costco does not offer curbside pickup, a business that has boomed for its two rivals," wrote Motley Fool's Jeremy Bowman.

Over the past few years, however, Costco has been investing in its website and delivery options.

Costco has changed its focus

When Ron Vachris became Costco's CEO in 2024, he subtly shifted the chain's focus making digital and member experience a bigger priority.

“The new CEO thinks there is an opportunity to use technology better. In my view, he is correct in his assessment. Costco can improve in areas like collect-from-store, checking what’s in stock at the warehouse, and making the e-commerce process easier,” he wrote on RetailWire.

Mellissa Minkow, who has spent multiple years leading retail strategy at brands including Target, thinks Costco’s efforts don’t have to lead to more digital sales.

“Investing in technology doesn’t need to mean that you’re expecting tons of growth via digital channels — investing in technology can also/instead mean improving backend systems for a better in-store and/or omnichannel experience. It’s important that Costco evolve with the times, and investing in technology is synonymous with that,” she posted on RetailWire.

Brian Delp, a retail CEO and member of RetailWire's Brain Trust, thinks that Costco has a tightrope to walk.

"There are certainly ways Costco can evolve with technology while staying true to its core values. A big element to Costco is the lack of frills, however reducing friction for the consumer and simplifying the experience is related. How Sam’s Club introduced AI image tracking to reduce the long lines when leaving the store is just one example," he shared.

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