Costco, the membership-based warehouse club, has announced that it will be increasing its membership fees in the U.S. and Canada. Starting from September 1st, the annual membership fee will be raised by $5, bringing it to $65. The higher-tier plan, known as “Executive Membership,” will see an increase to $130 per year from its previous price of $120.
This fee increase will affect approximately 52 million memberships, with just over half of them being executive memberships. The news of the fee hike caused shares of Costco to rise by about 2% in extended trading on Wednesday.
This is the first time Costco has raised its membership rates since June 2017. Typically, the company raises rates every five and a half years, which would have put them on track for an increase in late 2022 or early 2023. However, Costco decided to hold off on raising fees until now.
In interviews with CNBC, CEO Craig Jelinek explained that the timing was not right previously due to consumers dealing with high inflation. This move shows that Costco believes the economic situation has stabilized enough to implement a fee increase without negatively impacting its members.
Membership fees are a crucial source of revenue for Costco and play a significant role in keeping merchandise prices low. Sam’s Club, Costco’s rival owned by Walmart, raised its membership fee in 2022 for the first time in nine years. Even after the increase, Sam’s Club memberships are still cheaper, with club members paying $50 annually and higher-tier “Plus” members paying $110.
BJ’s Wholesale, another competitor, charges annual membership fees of $55 for club members and $110 for its higher-tier level. By comparison, Costco’s fee increase brings its membership pricing closer to that of its competitors.
Costco has also taken steps to ensure that only valid members are utilizing their services. They implemented stricter enforcement measures last year, such as checking memberships in self-checkout aisles, to prevent unauthorized use of other members’ cards. This move echoes the actions taken by Netflix, which has cracked down on people using its service without paying.
Overall, Costco’s decision to raise its membership fees reflects its confidence in the current economic climate and its ability to continue providing value to its members. While it may be an adjustment for some, the fee increase allows Costco to maintain its low merchandise prices and sustain its business model in a competitive market.
