Digitally Enabled, Twenty-One PercentThin moat

Costco's digital business is small, fast, and genuinely ambiguous in its effect on the moat.

The figures first. E-commerce represented approximately 7% of total net sales in fiscal 2025; digitally-enabled sales — anything initiated on a digital device, whether fulfilled from a warehouse or a distribution centre, plus Costco Travel — approximately 10%¹. E-commerce comparable sales grew 16% in each of fiscal 2024 and 2025. In fiscal 2026 Costco changed the metric to digitally-enabled comparable sales, which grew 21% in the third quarter and 22% over thirty-six weeks², against 7% for core merchandise in the quarter.

The optimistic reading is that this deepens the membership. A member who buys online as well as in the warehouse uses the card more often, which is exactly what renews it, and Costco's online assortment of 9,000 to 10,000 items extends the value of the fee beyond what fits in a 147,000 square foot box. On this reading digital is the ancillary business that finally scales.

The pessimistic reading is that it dissolves the thing being protected. The warehouse works because of a physical trip: the treasure hunt, the sample table, the impulse pallet, the basket that ends up larger than intended, the fuel queue on the way out. A member who orders online has none of that, buys the item they came for, and has been quietly converted from a trip into a transaction — which is a customer any e-commerce company can serve, and several serve better.

The economics differ too. An item picked, packed and shipped to a house carries fulfilment cost, packaging cost and a higher return rate against a business already running an 11% gross margin. Costco's disclosure that ancillary margin was helped by "pharmacy and e-commerce"³ is encouraging on that point, and is a small number moving fast rather than settled evidence.

Follow digitally-enabled sales as a share of net sales, about 10%. If it reaches a quarter while frequency keeps falling, the digital business is cannibalising the trip rather than adding to it.