Costco 2014 Annual Report Download - page 5

Our gasoline business continues to expand, with almost all new U.S. and Canadian
warehouses opening with gasoline stations; and we’ve added gasoline operations in
Australia (three locations) and the U.K. (one location), with more international locations
planned. In the U.S. and Canada we introduced our Kirkland Signature™ gasoline,
which exceeds the TOP TIER™ performance standards. Gasoline sales were in excess
of $11 billion in 2014; with an increase in profits despite a very volatile market. We
believe our gasoline operations not only provide our members with an exceptional value
proposition, but also represent another factor driving “in-store” shopping frequency.
Our pharmacy, optical and hearing aid departments all recorded increases in sales and
profits in 2014; and provided our members with great quality and savings on a variety of
health and wellness products and services. Our pharmacies again received recognition
for low prescription prices – in many cases at a fraction of our competitors’ prices. We
also continued to expand our selection of over-the-counter products, including several
Kirkland Signature™ items. Our optical department once more received acclaim for its
exceptional service, selection and prices; and, in our hearing aid department, sales and
profits were bolstered by the success of our Kirkland Signature™ premium digital
hearing aids, with great prices on state-of-the-art products.
Our e-commerce business grew close to 20% in 2014, to nearly $3 billion in sales. Our
Mexico website went live in 2014, adding to our online sites in the U.S., Canada and the
U.K. We plan to continue the expansion of our e-commerce business into other
countries where we have operations. The lines between online and brick-and-mortar
stores are blurring as multichannel retail is evolving as part of the everyday retail
environment. Many of our members are well-traveled digital shoppers who research
product features, check official reviews and conduct price comparisons online with the
use of computers, tablets and mobile devices. We see this as both a challenge and an
opportunity, and continue to seek ways to enhance our website and mobile applications
to better meet the needs of our members. This year we improved the navigation,
checkout performance and search engine optimization of our web sites. We also
relaunched our mobile site and apps for smartphones and tablets; and integrated
several of our inline and online buying teams to better leverage our combined buying
power, get more key brands online, expand our item selection, and provide even greater
value to our members. Additional online capabilities are also being evaluated. For
example, we are partnering with Google Express in several markets to test delivery of
online orders; and we are working with Alibaba, on their Tmall site, to provide Costco
merchandise to online shoppers in China.
Our seventy-six million loyal Costco cardholders are the key to our success; and their
satisfaction with the merchandise they buy and the service they receive with every
shopping experience is our constant goal. Membership revenue increased over six
percent in 2014 with strong signups at our new openings, particularly in Asia and
Australia. The growth in our Executive membership base this past year was particularly
satisfying. With strong signups and upgrades, Executive Members now account for
more than one-third of our memberships, and almost two-thirds of our sales.
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