The Unusual Way Costco Is Trying To Prevent Shipping Delays
Costco has chartered three ships in an attempt to circumnavigate the global shipping crisis and the costs that come with it. The plan is to transport products from Asia and Canada to the United States. However, as 10 News reports, Costco's CFO Richard Galanti expects that it will take twice the usual time for some items to reach store shelves. "It's a lot of fun right now," he commented.
This occurs almost a week after NBC covered the drastic steps the company was taking to manage their dwindling supplies. Products like toilet paper, bottled water, and cleaners were placed under strict rationing. But Galanti explained that unlike the last series of shortages, the issue is not with the amount of stock: "Now they've got plenty of merchandise but there's two- or three-week delays on getting it delivered because there's a limit on short-term changes to trucking and delivery needs of the suppliers, so it really is all over the board."
Deutsche Welle writes that the driver behind the delivery issues is a combination of people ordering more things while staying at home, the pandemic's disruption of regular port activity, and a shipping industry that was previously in a slump and cannot find a fleet to match demand.
A very Costco solution
While Costco actively hiring its own ships to ensure their goods' delivery is a dramatic move, we should also appreciate how on-brand it is for Costco. After all, as 10 News notes, the reason that the company has established its own trade routes is to ensure that product prices don't go up.
Consider, for example, the fights that were fought to keep Costco's rotisserie chicken below $5. CNN relays the extent to which Galanti was willing to go for that price tag: "$30 million, $40 million a year on gross margin by keeping it at $4.99. That is what we do for a living," he said. And part of that battle involved developing a chicken processing facility so that Costco would not have to deal with the likes of Tyson. Food Navigator described the move as a "precedent." If Costco could source its own meat, other companies might follow.
Now, it seems unlikely that Costco will suddenly pivot to become a shipping company. But, by the same token, it isn't utterly unimaginable that the chain would do so in order to keep its prices at a competitive point.