Costco Enters Grocery Delivery War in Paid Search Advertising
A new player has emerged in the online grocery wars being fought on the search engines—Costco. From October 27 through November 9, AdGooroo found Costco second only to Instacart in U.S. Google desktop text ad clicks and impressions on 38 grocery delivery-related keywords, including ‘grocery delivery’, ‘online grocery shopping’ and ‘grocery delivery services’.
During the 14-day period, Instacart captured a commanding 23.5% share of clicks on the 38 grocery delivery keywords. Yet newcomer Costco still shook up the field with an 11.4% click share, besting all other advertisers, including Hello Fresh (8.2% click share), Walmart’s Jet.com (7.8% click share) and Walmart itself (7.7% share). Amazon, which made headlines this August with its acquisition of Whole Foods, garnered just a 3.5% share of clicks on the grocery delivery keyword group.
Notably, Costco’s same-day grocery delivery service is powered by Instacart. Despite this relationship, the two companies are still competitors to one another in trying to capture consumer clicks on the search engines.
With regard to share of voice, Costco was far closer to Instacart, capturing 14.6% of impressions on the keyword group compared to Instacart’s 17.1% share of impressions.
Prior to October 27, AdGooroo data does not show Costco advertising on the 38 grocery delivery keywords.
A November 9th search of the keyword ‘online supermarket’ on U.S. Google shows Costco in the top ad position
Despite its recent success in paid search advertising, Costco may have a challenge converting new grocery delivery customers that its competitors on the keyword group do not. Specifically, the warehouse club charges a $60 to $120 upfront membership fee in order for consumers to shop in its stores or use its same-day grocery delivery service, whereas other online grocery providers like Instacart charge a smaller fee per delivery (typically $5 to $7) or offer free in-store pickup like Walmart.