Costco is one of those wholesalers with a robust financial base, making it seldom sway to economic uncertainties. Indeed, the wholesaler’s customers have enjoyed a steady membership fee since 2017. However, that streak has come to an end.
The company recently announced an increase in its annual membership fee, indicating that inflation and the increasing cost of living have affected the wholesale chain.
Shoppers to Pay More for Membership
The increment will affect some 52 million Costco members, about 25 million of whom are executive members, the most expensive membership plan. The new billing scale, initiated by Gary Millerchip, will go into effect by September.
Millerchip recently became Costco’s finance chief and made the change barely four months after taking over.
ALSO READ: ‘Amazing’ New Mini Cakes From Costco Leave Shoppers Drooling
Membership Fee Increment Affects All Plans
The increments will find holders of executive memberships paying an annual fee of $130 relative to the former charge of $120. Similarly, business, business add-on, and US and Canada Gold Star members will part with $65, compared to the $60 charge they were paying before.
However, the reward cap would be a commensurate increment from $1,000 to $1,250.
Annual Fees Finally Reviewed
Costco is obviously a wholesale behemoth, boasting 882 warehouses. Some time ago, it was customary for the wholesaler to review membership fees every five years. However, the recent increase in the wholesale outlet would be the first in the past seven years.
The wholesaler’s last membership fee increase happened in 2017 and affected 35 million members.
Increments and Digital Innovations
Interestingly, the increments to go into effect on September 1 are not all that Costco members should anticipate in 2024. In a recent statement in the Wall Street Journal, Millerchip inferred that the wholesaler is looking beyond its physical shopping experience and may venture into e-commerce.
Millerchip also cited his experience helping businesses go digital. However, he acknowledged that the digital evolution may hinder the brand identity enjoyed by most Costco members.
Business Development Tailored to Customer Needs
Millerchip also expressed his understanding of how giving customers the best user experience fosters easy adoption of innovative development of businesses.
While growth and innovation are inevitable, Millerchip reassures customers that old and new services will be tailored to meet their needs. Above all, the hinted digital innovation would be brought on in phases and calibrated in response to feedback from Costco customers.
Why the Increment of Membership Fees Dragged
The change in membership fees would not surprise Costco shoppers. Indeed, while the change materialized during Millerchip’s tenure, it predates his arrival at the wholesale company.
During the 2023 Q3 earnings call, the company’s former finance officer, Richard Galanti, said the membership fee increment is a matter of “when, not if.”
Inflation and Flagging Economy Responsible for Hike of Costco Annual Fees
In effect, ratifying the membership fee increment would be Millerchip’s first significant move as the new chief finance officer. Galanti would later reveal that he held off on that decision because the shock of the inflation spike was still fresh on the economy.
Increasing the Costco membership fee during Galanti’s tenure as CFO might have worn out customers financially.
Why Did Costco Raise Membership Fees?
The effects of national inflation are starting to ease off on the US economy. Still, most business concerns are still feeling the bite. Businesses like Costco, which have a reputation for offering ultra-low markups, would have to break even one way or another.
In Costco’s case, they found that raising membership fees mildly was the best way out.
What is the New Costco Membership?
In the US and Canada, the basic Costco membership will be hiked to $65 from $60. Meanwhile, executive membership will go from $120 to $130. These changes will apply to all new membership subscriptions on and after September 1.
With the free Household Card, members can shop at all Costco outlets around the world.
What Percent of Costco Members Renew Their Membership?
It is one thing to have subscribers and another to get ghosted after the first subscription. That is far from the case with Costco, as over 90% of its members renew their membership.
Indeed, the wholesaler recently announced that 73% of its annual profit in 2023 came from membership fees, amounting to about $4.6 billion. Interestingly, membership renewals seem to be immune to leadership changes at the company.
ALSO READ: Costco Announces First Membership Fee Increase Since 2017
Can I Shop at Costco Without a Membership?
Shoppers don’t necessarily need a membership to purchase items at Costco. Here’s why. If a friend or relative has an active membership, they can buy other people Shop Cards with which they can access any of their outlets and buy items.
However, there might be slight price differences in the offerings available to members and nonmembers.
You Might Also Like:
Harris Introduces “Opportunity Economy” Focused on Reducing Food, Housing, and Family Costs
Jamie Dimon Advocates for ‘Buffett Rule’ to Tax Millionaires and Address National Debt
Warren Buffett Reveals His Will’s Key Lessons—Valuable for Any Wealth Level
Murdoch Family Feud Sheds Light on Nevada’s Growing Secret Trust Industry