As a matter of fact, Costco is raising its annual membership fees in the United States and Canada by $5, and the cost of its most expensive membership by $10. That is why getting a membership now would be convenient. Not doing so now, and getting it in a few months may mean spending more money.
For your information, this hikes are not frequents. Actually, this has been the first increase since 2017. Costco needs these fees to keep prices as low as possible since it has competitors such as Sam’s Club and BJ’s.
Costco hikes membership fees
The membership-based company announced last week that it will increase its membership fee by $5 in the U.S. and Canada starting September 1. This change will raise the annual membership cost from $60 to $65. Additionally, the most expensive one, known as the “Executive Membership,” will see an increase from $120 to $130 per year.
According to Costco, the fee increases will impact about 52 million memberships, with a little over half of them being executive memberships. Costco relies on these fees to maintain low prices, which is crucial as it competes with other warehouse clubs like Sam’s Club and BJ’s.
Shares soared by approximately 2% during extended trading last week, reflecting a positive market response.
Costco’s Membership Rate Increase
This rate increase marks Costco’s first adjustment since June 2017. Historically, the company has raised membership fees roughly every five and a half years, which would have placed the next increase in late 2022 or early 2023. However, the company chose to delay this hike.
The Timing Behind the Decision
In interviews with CNBC, CEO Craig Jelinek explained that it wasn’t the right time to raise fees as consumers were grappling with high inflation. Echoing this sentiment, Chief Financial Officer Richard Galanti provided similar insights during prior earnings calls.
The Role of Membership Fees
Costco relies heavily on membership fees to drive a significant portion of its revenue and to maintain low prices on merchandise. These fees are crucial in supporting the company’s business model.
Comparison with Rivals
It’s interesting to note that Costco’s competitor, Walmart-owned Sam’s Club, increased its membership fee in 2022 for the first time in nine years. Despite this increase, Sam’s Club memberships remain cheaper. Here’s the breakdown:
- Club Members: $50 annually
- Higher-tier “Plus” Members: $110 annually
Even after the fee bump, Sam’s Club still offers a more affordable membership option compared to Costco.
As this company navigates these changes, the delayed fee increase reflects a considerate approach to its customers’ financial situations during challenging economic times.
