Technology

Costco CEO, CFO talk AI-powered online sales jump, tariff strategy

Costco is reaping e-commerce sales rewards from AI technology and piloting automated pay stations that let members pay for pre-scanned orders with an average transaction time of eight seconds.

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March 17, 2026 by Judy Mottl — Editor, RetailCustomerExperience.com & DigitalSignageToday.com

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Wholesaler Costco is reaping e-commerce sales rewards from AI technology, directing a tariff strategy aimed at lowering prices to customers and piloting automated pay stations that will let members pay for pre-scanned orders with an average transaction time of eight seconds.

The latter, according to Ron Vachris, president, CEO and director, is already showing success as it's improving the flow of traffic and getting great member feedback.

Digital roadmap progress

Costco's digital roadmap is making strides to drive a more seamless experience for members in the warehouse and on its e-commerce site, said Vachris, who provided insight on the wholesaler's Q2 results in an earnings call on March 5.

"In the warehouses, we're achieving meaningful improvements in the speed of checkout, employee productivity, both as a result of our mobile wallet enhancements, pharmacy pay ahead and the rollout of employee pre-scan technology," Vachris told investors and research analysts.

The deployment of AI-powered personalized product recommendation carousels on the online store drove more than $470 million in e-commerce sales in a single quarter, and digitally-enabled comparable sales surged 22.6%.

"On our digital sites, we continue to roll out new personalization capabilities, which are resonating well with our members and are starting to have measurable impact on e-commerce sales growth," said Vachris.

"As consumers embrace AI and their shopping habits, we believe our commitments to providing the best value on great quality items can make Costco a beneficiary of these shifts. We're working closely with the leading AI companies to ensure our values will be visible to existing and potential future Costco members as they engage with these tools."

Costco is confident that digital technology will drive more sales in fast fashion.

"We have a clear road map for future digital enhancements and believe these will allow us to continue to grow digitally-enabled sales at a faster pace than overall sales," Millerchip said on the call.

Costco's online traffic in the quarter was up 32% and app traffic was up 45%.

"Sales of pharmacy, gold and jewelry, toys, tires, small electrics, special events and housewares, all grew double digits year-over-year. And our same-day delivery service offered through Instacart, Uber Eats and DoorDash continue to grow at a faster pace than our overall digital sales," said Millerchip.

Vachris said the digital enhancement, online and in warehouse, has played a role in Costco staffing management.

"Adoption of the new digital enhancements have really allowed us to maintain the staffing we have in place and then handle this new growth of volume we're seeing. It's improving the member experience and it's making the throughput much better, be it the pharmacy app that we've developed or the pay ahead that we have in our warehouses," he said.

Digital technology is also providing rewarding for Costco's pharmacy operations, said Millerchip.

"We've added some new AI tools to improve our in-stock positions on pharmacy, and we've also made some digital enhancements to make it easier for the member to check out at the pharmacy to speed up the experience there as well," he said.

Operations, membership growth

Costco operates 924 warehouses worldwide and expects to have 28 new openings in this fiscal year with a target of launching 30-plus new stores annually in the next few years.

It ended the second quarter with 82.1 million total paid members, which reflects an increase of 4.8% compared to Q2 in 2025, according to Gary Millerchip, Costco executive VP and CFO.

Membership fee income was $1.355 billion, an increase of $162 million or 13.6% year-over-year. The September 2024 U.S. and Canada membership fee increase accounted for about one third of Costco's membership income growth, said Millerchip during the earnings call. Excluding the membership fee increase and FX, membership income grew 7.5% year-over-year.

Costco's earnings report revealed net income came in at $2.035 billion or $4.58 per diluted share, up nearly 14% from $1.788 billion or $4.02 per diluted share in the second quarter last year. Net sales for the second quarter were $68.24 billion, an increase of 9.1% from $62.53 billion in Q2 2025.

Costco's latest earnings come on the heels of the wholesaler enjoying record-breaking sales in the first quarter of 2026.

In December 2025 Costco ranked as Canada's top grocery retailer for the second consecutive year, according to a dunnhumby's Retail Preference Index for Canada.

In the same month Costco sued the Trump administration claiming President Donald Trump exceeded executive authoring in enacting tariffs and misused the International Emergency Economic Power s Act.

Costco's tariff strategy

Vachris led off the Q2 earnings conference addressing the tariff scenario, which kicked off in January 2025 when President Donald Trump began enacting tariff policies, a White House administration focus that continues to the present.

American importers and their customers are bearing the brunt of enacted tariffs to the tune of 96% of the tariffs, while countries importing goods are paying 4%, according to a report from the German Kiel Institute for the World Economy.

Economists have reported that consumers won't see prices coming down despite a Supreme Court ruling that declared Trump administration tariffs were not constitutional.

The Supreme Court ruling on Feb. 20 struck down the Trump administration's use of the 1977 International Emergency Economic Powers Act to impose across-the-board tariffs. In a 170-page decision and a 6-3 vote, the court ruled that Trump's use of IEEPA was not lawful. Trump then enacted a 15% tariff across the board which he then lowered to 10% tariff using a legal authority that allow an across-the-board impact tariff for 150 days and which could be extended by Congress.

"The future impact of tariffs remains extremely fluid as the recently eliminated IEEPA tariffs have now been replaced with new global tariffs for at least the next 150 days," said Vachris.

Costco's strategies include moving the country of production when it makes sense, consolidating buying efforts globally to lower the cost of goods, leaning in on its internal item brand Kirkland Signature, he told listeners.

"Throughout the past year, we've taken action to reduce the impact of tariffs. In many cases, we didn't pass the full cost on to our members," said Vachris

Since the Supreme Court tariff ruling, retailers and businesses have begun clamoring to get refunds. On March 5 two dozen states sued President Donald Trump claiming Trump doesn't have the power to impose such a tax and avert the recent Supreme Court ruling.

On March 10, The U.S. Customs and Border Protection announced it is revamping its system to process refunds related to the tariffs. The agency, according to a Wall Street Journal report, has collected approximately $166 billion since tariffs began in January 2025. The task of refunding the levies, which were ruled unconstitutional by the Supreme Court earlier in February, could require 4.4 million of staff hours.

In the earnings call Vachris said a tariff refund process is not yet clear. Nor is there any sort of timeline in sight.

"The complexity of the tariffs implemented over the past year, including layering of different tariffs on top of each other and multiple changes in rates throughout the year, also made it challenging to track the exact impact to an in our commitment will be to find the best way to return this value to our members through lower prices and better values. We'll be transparent in how we plan to do this, if and when we receive any refunds."

About Judy Mottl

Judy Mottl is editor of Retail Customer Experience and Digital Signage Today. She has decades of experience as a reporter, writer and editor covering technology and business for top media including AOL, InformationWeek, InternetNews and Food Truck Operator.

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