Barclays (LON:$BARC) analyst Karen Short wrote an open letter to Costco (NASDAQ:$COST) on July 13, stating that she wants the major retailer to challenge Amazon’s (NASDAQ:$AMZN) attempt to acquire Whole Foods (NASDAQ:$WFM). Short believes that this may be the best way for Costco to convince its investors that it has a clear business strategy that can help it get through the crumbling retail industry.

Although Barclays sees Costco as one of the best retail companies, Short noted in her letter that investors still carry concerns regarding how Costco will be keeping up with an industry that is increasingly moving away from traditional brick-and-mortar stores and towards online sales. This can be seen in how investors have largely ignored Costco’s stock despite recent strong quarterly reports. Short addresses this in the letter, stating how investors are far more concerned about how Amazon’s announcement on June 16th about its proposed acquisition of Whole Foods will impact Costco’s business model than whether or not the retailer will be able to produce strong quarterly reports for the next four quarters.

Short offers a number of possible solutions on how Costco should address these concerns — the most dramatic one being a counter bid against Amazon for Whole Foods. Short thinks that Costco will be able to offer more for Whole Foods than Amazon, in addition to financial growth and increase in value.

Other solutions that Short suggested in her letter include a partnership with UK-based online grocer Ocado (LON:$OCDO) as well as advancing Costco’s efforts in online sales of non-grocery products. “If this means hiring an external army of Silicon Valley techies — then so be it,” Short said in her letter.

Even though several analysts believed in the past that Costco will be able to survive Amazon’s slow domination of the retail industry, the retailer/grocer has long since been lacking when it came to online sales. This can become a big issue, considering the fact that other retail companies have already started bulking up their e-commerce businesses and Amazon’s plans to acquire Whole Foods. Costco’s loyal customer base and effective membership business model may not be able to protect the company as much as previously thought thanks to some steady growth in Amazon’s Prime membership numbers.

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