Costco, the membership-based warehouse club, announced a membership fee increase of $5 in the U.S. and Canada starting on September 1st. This means that annual memberships will now cost $65, up from $60. Additionally, the higher-tier plan, known as “Executive Membership,” will see an increase to $130 per year from $120. This fee hike will impact approximately 52 million memberships, with over half of them being executive memberships.
This increase marks the first time Costco has raised its membership rates since June 2017. Traditionally, the company raises rates roughly every five and a half years, which would have put Costco on track to increase fees in late 2022 or early 2023. However, due to various factors, including consumer concerns over high inflation, Costco held off on raising fees until now.
Costco’s rival, Walmart-owned Sam’s Club, also raised its membership fee in 2022 for the first time in nine years. Even after the fee increase, Sam’s Club membership remains cheaper than Costco, at $50 for club members and $110 for their higher-tier level, “Plus,” annually. Similarly, BJ’s Wholesale offers annual membership fees of $55 and $110 for club members and their higher tier, respectively.
Revenue and Pricing Strategy
Costco relies heavily on membership fees to drive its revenue and maintain low merchandise prices. By increasing its fees, Costco aims to continue providing quality products at competitive prices while increasing revenue. The company’s strategic approach is reminiscent of other subscription-based services, such as Netflix, which have also cracked down on unauthorized users to protect their revenue streams.
While the increase in Costco’s membership fees may come as a disappointment to some customers, it is a strategic move by the company to ensure its financial stability and continue delivering value to its members. Costco’s commitment to providing quality products, low prices, and excellent customer service remains unwavering, even in the face of fee increases.
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