Earlier this year, Costco’s Chief Financial Officer Gary Millerchip said that it was a matter of “when” not “if” the big box discounter would raise its membership fee. Well, “when” has happened.
The company has announced that, effective September 1, 2024, it will increase annual membership fees by $5 for U.S. and Canada Gold Star (individual), Business, and Business add-on members. With this increase, all U.S. and Canada Gold Star, Business and Business add-on members will pay an annual fee of $65.
Also starting September 1, Costco’s annual fees for Executive Memberships in the U.S. and Canada will increase from $120 to $130 (Primary membership of $65, plus the Executive upgrade of $65), and the maximum annual 2% Reward associated with the Executive Membership will increase from $1,000 to $1,250.
The fee increases will impact around 52 million memberships, a little over half of which are Executive.
$5 for you – $350 million for them
“We estimate the fee increase will provide roughly $350 million in incremental sales and operating profit over the next two years, with two-thirds flowing through the model in fiscal 2025 and the remainder primarily in the first half of 2026,” William Blair Analyst Phillip Blee said in a Thursday note.
“We believe the fee increase will allow Costco to expand its competitive edge, with potential for expanded omnichannel and digital offerings that the company has been successfully stubborn to adopt.”
Costco probably feels like its fee increase is fair since it’s only $5 and it hasn’t held its hand out for one since 2015. Its members probably feel the same, given that the company has a 93% membership renewal rate with its members in the U.S. and Canada.
Are we about to enter Lemming Land?
Does that mean that others will follow suit? Blee thinks so – at least with BJ’s Wholesale Club, “given [BJ’s] historical propensity to wait for Costco to make the first move.”
A BJ's membership costs $55 per year for an individual or business. A higher tier Club+ membership is also available for $110 per year.
You ask what about Sam’s Club? Well, Sam’s did raise their membership fee $5 last September, but there’s nothing in the rumor mill about another coming this September.
Sam’s giveth, Sam’s taketh away
However, Sam’s has a different consumer gripe it’s having to deal with. The company recently put the word out that its Plus members will have only until August 18 to enjoy the “free shipping” perk that came with their membership.
The club is eliminating free shipping for online orders under $50, and it will only offer it for “qualifying orders of $50 or more,” according to an email that was sent to members.