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Sun. Jul 21st, 2024

Costco raises membership dues for first time since 2017.

By meerna Jul11,2024
Costco raises membership dues for first time since 2017.

Costco shoppers will see their membership fees increase for the first time since 2017. The company is betting that the increase in profits won’t scare away its loyal customers.

Starting September 1, Costco Gold Star, Business and Business members in the U.S. and Canada will pay $65 for an annual membership, up from $60.

Board members will have to pay $130, an increase of $10 per year. The change will affect 52 million members, “slightly more than half of whom are board members,” Costco said in a news release. Board members receive rewards of up to $1,000 on purchases. The maximum reward amount will increase to $1,250 with the increased fees, the company said.

The fee hike came despite Costco defending its image as a place to find cheap, mass-market goods in an economy struggling with inflation. During an earnings conference call in late May, Gary Millerchip, the company’s chief financial officer, told investors that Costco’s hotdog-soda combo would continue to sell for $1.50 — a price that hasn’t changed since the 1980s — a move that won widespread praise.

Millerchip also said during the May call that it wouldn’t rule out increasing membership fees, adding that Costco considers raising membership fees about every five years.

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“Despite inflation, Costco has kept its prices low,” said Felipe Caro, a professor at UCLA Anderson School of Management. “But the membership fee eventually had to increase, and it makes sense to do so now that customers are really seeing the value. Costco’s stock price rose after the announcement, so the market agrees it was the right decision at the right time.”

Costco shares rose more than 2.5 percent following the announcement.

The company reported net income of $1.68 billion for the 12-week period ended May 12. That figure includes $1.12 billion in membership fees it collected during the quarter. Costco earned nearly $4.6 billion in annual membership fees in the fiscal year ending in early September, up 8 percent from a year earlier.

But the extra fees could make it harder for Costco to attract new customers and retain relatively new members who may not be as loyal as regulars, said Dinesh Gauri, a marketing professor at the University of Arkansas.

“I don’t think they’re offering any other deals or new services… to customers to justify the fee increase,” he said. Customers who aren’t loyal or have joined recently may want to consider buying from rivals like Sam’s Club, Gauri added.

Sam’s Club, a Costco-like wholesaler, has raised its membership fees in 2022. It now charges $50 for a basic membership and $110 for a Plus membership, up from $45 and $100, respectively.

Customers could also move to rivals that don’t require memberships, such as Target and Kroger, according to Gauri. Those companies have “raised their game” in recent years, he added, while offering what he believes are stronger pickup and delivery options than Costco.

“If someone doesn’t need a membership, they have little to lose,” he said.

By meerna

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