What do I Think About the Increase in Membership Fees

October 25th, 2011 · 13 Comments

So, a couple of weeks ago, I published a Guest Post that discussed the rising membership rates for Costco.  I enjoyed reading everyone’s opinions and thoughts on the situation.  But I never shared my views.  So, I figured I should take the time to share my opinion as well!

As I’m sure everyone here has heard my now, Costco has made the decision to raise their membership rates in the US and Canada by 10%, which means the new fees will be $55.00 for Goldstar and Business membership and $110.00 for Executive membership.  This change will go into effect on November 1, 2011.  With the increase in membership fees, there will also be an increase in the maximum amount of the Executive Member 2% refund from $500.00 to $750.00.  The increase in membership fees will impact a little over 22 million members, roughly half of which are Executive Members.

So, that’s the nuts and bolts of the change.  While I can see Mike’s (original guest poster) opinion that this might be a warning sign of things to come with the changing CEO, I’m not sure I am totally sold on that.  My first knee-jerk reaction was that it was the new CEO too.  However, he isn’t actually taking over until January and Jim Sinegal is probably not likely to just let him do whatever he wants to the company he has built for decades, especially not before he steps down.  Jim Sinegal is still the CEO and clearly he was present in any discussions and had a major hand in any decision to raise the rates.  I think that it was probably just time to increase the rates a little bit.  Considering that the last time they raised the membership rates was more than 5 years ago, in May 2006, you can’t help but think about all of the pricing and salary increases that have probably come about in that time period.   I would certainly like to think that in five years, the people working in the membership and customer service departments at Costco have had a salary increase, or two, or three.   I know that I would much prefer Costco to bump up the price of their membership fees by this little bit, than increase the profit margin on all of their products by 1 – 2%, which would end up costing everyone much more in the course of a year.

Mostly though, I’m just not upset by the 10% increase.  I can easily save that extra $10.00 in just one single purchase.  Just recently, I bought a grater, not a high dollar purchase really, but I saved £20.00, or $31.00, on that purchase by shopping at Costco instead of some other store.  So, clearly, that would have covered the extra $10.00.  And I save that much regularly on my purchases at Costco, without even trying that hard.  If I buy something big like eyeglasses or contact lenses, I often save the whole price of my yearly membership fee in one swift purchase.  That also doesn’t take into account, Dave purchasing glasses as well.  Or, our 2% back that we get on any purchases made at Costco.

If the 10% increase seems too much for you to handle, then I would challenge you to do a little price comparison research to make sure that the prices at your other shopping options are as low as you think. Can you really get as good a deal at some other shopping outlet as you can at Costco?  If you don’t pay close, and frequent, attention to the prices at various places, you can forget what the regular costs are and start thinking that they were cheaper, when in reality they aren’t.  I used to do a yearly price comparison at Costco and a couple of other grocery stores in my area in Austin.  I was often amazed at some of the differences, and pleasantly surprised by some of the similarities in prices, though that was less often.  Though, overall, Costco did offer the biggest savings on the whole list of items.  So, you have to take into account individual prices as well as the grand total for your shopping.  Mostly my comparisons made me realize that Costco really does have better prices and better quality than the average grocery store.

And lastly, Costco would have to make one heck of a big jump in membership fees for me to even remotely consider shopping at Sam’s Club.  Ugh.  There are so many reasons why I don’t like shopping at Sam’s, so I won’t even go into all of that.  But they’re not an alternative to Costco, in my opinion.  I’d just go back to regular retail outlets and online sources than even step foot into a Sam’s Club again.

Costco currently has an 89% renewal rate for its memberships.  It will certainly be interesting to see how this increase in fees changes that number.  If it changes it at all.  My guess is that it won’t really have much of an impact.

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13 Responses so far ↓

  1. 1 Was Costco Fan // 2011.11.11 at 10:18 am

    Del, you can go to Costco website and search for item#Item # 394485. This is priced at $29.99 and its the same in the store too. This is the item that was being sold for $19.99. An increase of almost 50% !!! Just an example of how Costco hiked prices on certain items and most of the customers (including myself) took time to realize it. I am fine with Costco increasing the membership fees as long as it tries to keep the prices of its items reasonably low.

  2. 2 Del // 2011.11.04 at 3:05 pm

    I just bought kirkland baby wipes yesterday and it was 19.99 regular price and they had a coupon for 4 bucks off. 16 bucks for 900 wipes. My only complaint about Costco is they let that fake organic brand Horizon (Dean foods) come in and sell half n half for 2.79 and undercut Land O lakes by .20 cents. Of course, now that they got the business they have jacked up the price to 4.29. I do not mind paying more for organic but not that brand which is not.

  3. 3 Was CostcoFan // 2011.11.01 at 1:17 pm

    I used to purchase Kirkland baby wipes and they were my favorite. However there was a steep increase of price ($29.99). If i remember it correct the last time i bought the wipes it was less than $20. I am surprised at such steep price hike.

  4. 4 pat garrity // 2011.10.30 at 12:44 pm

    I HAVE BEEN A COSTCO MEMBER EVER SINCE PRICE CLUB MERGED WITH COSTCO, I JOINED PRICE CLUB IN 1982. I AM A MAJOR COSTCO FAN. HAVE NEVER HAD A COMPLAINT. I’VE SHOPPED IN CA,. VEGAS AND AZ. THE SERVICE AND QUALITY NEVER VARIES. THE HELP IS ALERT, ATTENTIVE AND FRIENDLY AT ALL THE STORES I EXPERIENCED. I ALSO HAVE BEEN A MEMBER OF SAMS (WHEN COSTCO WAS OUT OF RANGE). SUFFICE TO SAY THAT I HAVE NOTHING POSITIVE TO MENTION ON SAM’S CLUB. NOW THAT COSTCO OPENED IN PEWAUKEE (WI) SAM’S IS HISTORY. PAT

  5. 5 jane // 2011.10.30 at 9:18 am

    MS: You totally misunderstood the point. You’re welcome to shop at Costco, but Costco is a warehouse seller. By definition, that means it will sell stuff in BULK because it can get stuff cheaply and pass on the savings to you. If it doesn’t get stuff in bulk, it likely won’t be able to get a discount and sell the stuff to you.

    As for obesity, that is a totally different issue. No one is suggesting that downing all of the provided servings at once is a good idea. (You might have a better argument if you pointed at their food court)

    • 6 Kimberly // 2011.11.05 at 4:58 am

      I’m going to have to agree with Jane. If you don’t like the Costco business model of selling things in bulk, you need to find someplace else to shop. The problem isn’t them, it is your expectations of them to be just like a regular grocery store.

      We’re just two people and we don’t have a problem shopping there. Can we buy everything sold in bulk? No, because some things we won’t be able to finish before they go bad. But there’s plenty that we can buy and the savings are totally worth it. I don’t eat everything all at once – that is what we have a fridge and freezer for, or a pantry.

  6. 7 MS // 2011.10.28 at 8:41 pm

    I dont think its acceptable to say that if I want to buy reasonable quantities, I should buy at the supermarket. I like their deals on furniture, clothes, luggage, medicines, eyeglasses, electronics, etc. I would like to use my membership more by buying some food.

    Some of their food products are really good. I really like their extra virgin olive oil and the price is fantastic at less than 6$ per gallon, if you buy 4 gallons. But I would pay $8 if they had a 1 gallon bottle of olive oil. Instead of going to Safeway and paying $20 for it. This is a real example. I find Costco’s singular focus on price to be dissappointing as a consumer. USA is in the middle of an obesity epidemic and it would be going deeper into it if people kept buying Costco size boxes.

  7. 8 JS // 2011.10.27 at 1:59 pm

    We are only buying for 2 (except one of us is 6’7 and eats like a horse) but somehow we are quite happy about the bulk buying. We basically keep everything in the fridges (we have two). Some produce like carrots, garlic, onion, potatoes, apples and eggs actually has very long shelf life. We just stay away from the ketchup, mayo, gallon of oil… which we are not so interested in and no matter how much time given we will never be able to finish.

  8. 9 jane // 2011.10.26 at 6:59 pm

    MS: if you want packaging that targets a family of 4, you need to shop at a regular supermarket. Costco is able to offer low prices b/c they sell in bulk. Costco is a warehouse store!

    Personally, as a single person, I have no problems buying their groceries. I’ll either freeze, share or eat the food. No waste here.

  9. 10 MS // 2011.10.26 at 5:24 pm

    I dont care about the 5$ price increase. However, instead of having a singular focus on keeping prices low, I hope they can provide packages of stuff in reasonable quantities. I would like to try food stuff at Costco but their product sizes are ridiculous. I sometimes feel that they should start targetting a typical family of 4. Half the food, I cannot buy because it seems to be targetted for purchase by restaurants.

  10. 11 Mark // 2011.10.26 at 4:13 pm

    You don’t understand the bussiness model. The margin on the items they sell covers the day to day operations of the company. This forces them to run a very efficient company and always look at ways to create excitememt and drive sales. The membership fees are set up to represent the profit. This forces them to always work on keeping the members happy and show a value for the membership so they keep renewing. I challenge you to find a company that is run as well as Costco before you try to change the model.

  11. 12 Cheap Skate // 2011.10.26 at 3:59 pm

    Why not drop memebership fees altogether? Sales would skyrocket.

  12. 13 Mark // 2011.10.26 at 11:20 am

    I agree with you 100% on the increase in membership fees! Another retailer would probably just raise the margins on the products they sell without the consumer even being aware. I have worked with Costco and have seen how they buy and price their goods and I can tell you they always keep the margins the same. If there is ever a choice between raising or lowering the margin to set the price point they always lower it. As far as Sam’s goes I could not agree more. Sam’s purchases for the entire country out of one buying office so you don’t see the local brands like you do at Costco. Also I have found the Costco employees to be much happier which leads me to believe they are treated much better. I am a Costco fan for life!

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