For years, Amazon led the market by offering free two-day delivery to Prime members. That was a massive improvement over previous shipping standards, and it became table stakes for any retailer hoping to sell to a mass audience.
As a shopper, two-day shipping generally worked for me, but once Uber Eats made ordering from Target, Publix, or other grocery stores a same-day possibility, I have occasionally taken advantage of that service.
Yes, prices are higher than buying in-store. But if I’m working and need iced coffee, Gatorade, a box of ice cream sandwiches, and paper towels, and can get them without going farther than my front door, usually in less than an hour, well, I’m doing it.
Amazon delivery times vary based on where you live. Before we moved, most items we ordered at our Port St. Lucie, Fla., home came the next day, sometimes with same-day as an option. At our new home, about an hour south, nearly every Amazon order takes the full two days.
Now, Costco, which has never been known for fast delivery, has found a way to actually beat Amazon at the delivery game.
Costco partners with Instacart
Costco members get delivery from Instacart with the fees waived on orders over $35. And while the warehouse club does not promise one-hour delivery (it actually says “Costco favorites delivered in as fast as 1 hour” on the web page promoting the service), actual delivery times have been better than that.
CEO Ron Vachris talked about the partnership during the chain’s third-quarter earnings call.
“Average same-day delivery time in the U.S. is now less than 45 minutes, and the average member satisfaction rating is 4.8 out of 5. This part of our business is growing at an even faster rate than our digital business overall,” he said.
Keeping members happy so they renew is a key part of Costco’s business model, and same-day delivery has helped with that.
“[Delivery] is a strong driver of loyalty, as it is often our highest spending members who are using the service,” he added.
Costco also gives Executive members, who pay $130 a year, or twice the cost of a basic Gold membership, a $10 monthly credit to use on Instacart orders over $150.
Costco’s same-day delivery prices may be higher
While Costco does not comment on pricing, Instacart notes that many of its partners do mark up items for delivery compared to in the store.
“Earlier this year, Instacart announced that Schnuck Markets, Heritage Grocers Group, and home improvement chain Lowe’s switched to price parity. Walmart Canada lowered its markup, as did Costco on its same-day delivery websites for the U.S. and Canada,” Instacart shared in a report.
Instacart also shared why that’s a good thing.
“Grocery prices continue to be top of mind for consumers, and we know that working with retailers to offer their customers affordable prices is key to helping them drive faster growth and accelerate online grocery adoption. On our platform, retailers that price items at in-store parity consistently grow faster on average than those with markups,” the study showed.
Costco used to acknowledge and explain the markup on its same-day delivery page, but the language has since been removed.
“Costco’s item prices are marked up higher than your local warehouse; however, the item markup is reduced for Costco members. The order minimum is $35. This pays for the delivery service and to provide competitive pay to all shoppers working on the Instacart platform. Unlike a tip, which can only go to the shopper delivering your order, a markup allows Instacart to pay all shoppers (including those, for example, that also pick ordered items in the warehouse),” the warehouse club shared.
There’s a reason Costco does not offer the exact same prices in store and via Instacart, according to GlobalData Managing Director Neil Saunders.
“The rub is that shopping via third party apps does not give consumers access to the sharp Costco prices found in stores. Ranges can also be more limited, and you don’t get the full in-store experience with tasting and bargain hunting. For these reasons, these partnerships are incremental to, rather than a threat to, traditional memberships,” he told RetailWire.
Instacart
Americans may not actually want faster delivery
While Costco members have responded well to the offer of same-day delivery, it’s more a bonus than something consumers are demanding.
A 2024 McKinsey study showed that speed was not actually the top priority for most Americans when it comes to delivery.
Shoppers might be willing to trade off slightly slower delivery speeds for more assurance that packages will arrive on time within the promised delivery window, the survey showed.
“Ninety percent of consumers are willing to wait two or three days for deliveries —especially if it lets them avoid shipping costs, according to McKinsey. That same 90% “are likely to abandon shopping carts that feature high shipping costs for standard items.”
Related: Longtime grocery chain exits entire market after 49 years
