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Why Costco is running out of time to build a digital ecosystem

I estimate that large, legacy organizations have less than ten years to digitize their ecosystems. Why is the next decade more urgent than the last? Because we are on the cusp of a major generational shift, something that occurs only every 20-25 years.

So let’s start with my definition of a digital ecosystem: it’s where every client-facing capability of your organization is able to support a seamless multi-channel experience. My recent experience with Costco.com is a good example. As the busy mother of three boys, Costco is one of my go-to brands. I naturally thought the happiness halo that I get from their stores would translate to a positive online experience. I was dead wrong. The refrigerator that I purchased at Thanksgiving didn’t just take five weeks to arrive, there was almost no transparency or status along the way, and the product they delivered had a bad wire so it literally never worked. Just when I thought it couldn't get worse, the process of returning the faulty product was even more horrible than the purchase, including four+ hours on hold trying to reach their help desk. In the end, the only way I could get their attention was to blow up their social media handles with public complaints, something that is obviously bad for them but also unfortunate for me because nobody in their right mind wants to appear like a crazy person on Instagram, Facebook and Twitter. This was just a backup fridge for the laundry room; imagine the inconvenience if it was for primary use!

Let's unpack some of the ways my experience could have been different, and if much of this seems basic and/or foundational that's because it is:

  • I should have received a confirmation email or text with links to change or cancel my purchase (along with a viable phone number) within minutes after I hit submit. (A confirmation arrived 72 hours later and contained no live links.)

  • The refrigerator should have been available for delivery in the same timeframe as if I’d bought it at a local home goods store, which is seven to 14 days, not a month plus!

  • I should have been able to opt for SMS alerts on the day of delivery. I could only request a phone call, which maddeningly never happened.

  • The only way to indicate that the refrigerator needed to be returned was by phone; it's unacceptable that I couldn't do it online.

  • Contact center hold times should have been minutes not hours and their CRM system should have had history of my situation. (Perhaps it does but their agents are clearly not trained to look at Notes as I had to repeat my situation every time I called.)

  • Someone should have called me when the nightmare was over to confirm the situation was resolved.

What’s clear is this: Costco has grown up firmly grounded in the value proposition that people can, do, and will continue to visit their warehouses. Their entire IT and supply chain infrastructure was built to deliver goods and services in person. Transforming this framework to deliver a frictionless omni-channel experience instead isn’t easy but is possible with focus, digital expertise, and dollars. What's more, the farther behind they get on the basics, the more likely it is that their efforts to leverage big data, AI and newer technologies will also lag.

If Costco had made these investments, I wouldn’t have been stuck with hundreds of dollars of spoiled food, hours of wasted time, and my business going ultimately to Amazon. The digital economy is here and now, as evidenced by the legions of other unhappy people voicing complaints on Costco's social platforms Christmas. I posit that companies in all sectors -- ones with stalwart reputations, enviable market caps, and millions of existing customers -- are at risk if they don’t get it together fast. The number of disintermediated companies is piling up and with Generation Z coming for us, the stakes just get higher.