Dallas, Texas – Costco shoppers in the United States and Canada will notice an increase in their membership fees starting September 1. The retail giant announced the fee hike as the first increase since 2017, with hopes of bolstering profits without alienating its loyal customer base.
Gold Star, Business, and Business add-on members will now pay $65 annually, up from the previous $60. Executive members, who make up a significant portion of Costco’s membership base, will see their fees rise by $10 to $130 per year. Despite the fee increase affecting 52 million members, Costco believes it is necessary to enhance the value proposition for its customers.
Costco’s decision to raise membership fees comes amidst a challenging economic landscape marked by rising inflation. Despite this, the company remains committed to offering affordable prices, as demonstrated by its unchanged $1.50 hotdog-soda combo, a favorite among customers since the 1980s.
While the fee increase may seem sudden, Costco’s chief financial officer, Gary Millerchip, hinted at the possibility during an earnings call in May. The company strategically evaluates fee adjustments every five years, aiming to strike a balance between profitability and consumer satisfaction.
Experts like Felipe Caro, a professor at the UCLA Anderson School of Management, note that while the fee increase may be jarring for some customers, it reflects Costco’s ongoing efforts to maintain competitive pricing while providing valuable rewards to its Executive members. The market responded positively to the news, with Costco’s shares rising over 2.5 percent following the announcement.
Despite the positive market response, concerns linger about the potential impact of higher fees on Costco’s ability to attract and retain customers, particularly newer members. Dinesh Gauri, a marketing professor at the University of Arkansas, warns that without additional perks or services to justify the fee hike, some customers may consider shopping elsewhere, such as rival wholesaler Sam’s Club or non-membership retailers like Target and Kroger.
In light of Sam’s Club’s recent fee increase and the evolving landscape of retail competition, Costco faces the challenge of balancing profitability with customer loyalty. As consumers weigh their options, Costco must continue to innovate and provide value to retain its market position in the face of changing consumer preferences and expectations.