What is Costco doing with AI search?

Costco is working to improve how its merchandise is understood and surfaced by large language models, so its combination of price, quality, and included services is more visible when consumers use AI tools to compare products.

Why are appliances and tires mentioned?

Costco highlighted these as examples where AI search can capture added benefits like delivery, installation, haul-away for appliances, and installation, road-hazard protection, and nitrogen for tires—value that's hard to communicate in a conventional search result.

Large Language ModelsTop Companies' AI MovesAI Business & IndustryTop Companies AI2h agoAug 25, 2026, 06:31 JST2 min read

Costco's AI Search Traffic Grows Triple Digits, Conversion Highest

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Key takeaway

Costco's AI search traffic grew triple digits last quarter, though volume is low.
This traffic has the highest conversion rate of all website traffic.
The company aims to make its value clearer in AI tools, potentially boosting digital sales.

3 Key Points

What happened
Costco reported that in the third quarter of fiscal 2026, traffic from AI search grew at a triple-digit pace, though volume remains low. This traffic boasts the highest conversion rate of all traffic to its website.
Why it matters
Costco is working to make its price, quality, and included services more visible in AI tools, especially for items like appliances and tires where added benefits (delivery, installation, road-hazard protection) are hard to convey in conventional search results. This could become a meaningful new traffic source for e-commerce.
What to watch
Costco's digitally enabled comparable sales rose 21.5% in the quarter, and e-commerce site and app traffic increased 37%. The company is in the initial stages, and if AI-driven traffic scales while maintaining strong conversion, it could become an increasingly important contributor to digital sales growth.

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Context & Analysis

Costco's push into AI search comes amid a broader digital surge, with e-commerce traffic up 37% and digitally enabled comparable sales up 21.5% in the same quarter. The company is positioning itself to ride the shift from traditional search to AI-driven discovery, where its value proposition—bundled services and quality—can be more fully conveyed. Given that AI traffic already converts better than any other channel, scaling it could materially boost digital sales growth, even from a low base. Financially, Costco's stock has underperformed its peers recently, falling 7.8% versus the industry's 3% drop, though its valuation at a forward P/E of 42.19 remains above the industry's 30.14. The company's focus on AI as a traffic source may be a response to these pressures, aiming to sustain growth as competition from Dollar General and Target intensifies.

FAQ

What is Costco doing with AI search?: Costco is working to improve how its merchandise is understood and surfaced by large language models, so its combination of price, quality, and included services is more visible when consumers use AI tools to compare products.
Why are appliances and tires mentioned?: Costco highlighted these as examples where AI search can capture added benefits like delivery, installation, haul-away for appliances, and installation, road-hazard protection, and nitrogen for tires—value that's hard to communicate in a conventional search result.