Costco, the popular membership-based warehouse club, recently announced that it will be raising its membership fees in both the U.S. and Canada effective September 1. This increase will see annual memberships go from $60 to $65, while its higher-tier “Executive Membership” will increase from $120 to $130. The fee hike will impact approximately 52 million memberships, with a little over half being executive memberships.
Following the news of the fee increase, Costco’s shares rose about 2% in extended trading, marking the first membership rate increase for Costco since June 2017. While the company typically raises rates every five and a half years to stay profitable, it had chosen to delay this increase due to high inflation concerns. CEO Craig Jelinek and CFO Richard Galanti had previously stated that the timing was not right to burden consumers with added expenses.
In comparison to its competitors, Sam’s Club and BJ’s Wholesale, Costco’s fee hike positions it as the most expensive of the three. Sam’s Club, which is owned by Walmart, recently increased its membership fees for the first time in nine years. However, even after the increase, Sam’s Club memberships are priced lower at $50 for club members and $110 for its higher-tier level, “Plus.”
BJ’s Wholesale, on the other hand, offers memberships at $55 and $110 for club members and higher-tier members, respectively. This move by Costco signals a shift in the pricing strategy within the warehouse club industry, with Costco positioning itself as a premium brand with higher membership fees.
Costco also revealed that it had increased security measures to ensure that only legitimate members were using their services. This included additional checks at self-checkout aisles and cracking down on members who were sharing their cards with others. This move is reminiscent of streaming giant Netflix, which has also been working on preventing unauthorized use of its services.
The Costco membership fee increase signifies a strategic shift for the warehouse club as it aims to maintain profitability and remain competitive in the market. While consumers may feel the pinch of the higher fees, Costco’s reputation for quality products and services may help justify the increased cost for many loyal members.