CFO Of Costco Says $60 Membership Fee Will Be Up ‘When, Not If’

(CTN News) – Costco members can rest easy for now. A $60 annual membership fee wasn’t increased during the wholesaler’s earnings call earlier this month, but that doesn’t mean it won’t in the future. Richard Galenti, former CFO, told analysts it is a matter of “when, not if.”

“I don’t think it would be done simply because, hey, things have slowed down a little bit,” he stated. He said Costco would also consider membership renewal rates and new member signups.

Costco plans to do this at some point, he added, but “it’s not some big analytical formula.”

Some might be left wondering how the company prices its membership program and how future increases would be determined. It’s hard to answer, however, because membership and loyalty programs are often supplementary revenue streams.

Retail Brew spoke with Wayne Taylor, professor of marketing at Southern Methodist University who has researched loyalty programs. In Costco’s case, membership fees pay for the rest of their products.

Profits increase with more fees

The $6.3 billion in total income generated by the corporation was 72% derived from membership fees in 2023.

Walmart Inc., including its members-only wholesaler Sam’s Club and its own big-box chain, expects membership fees to account for a greater chunk of profits in the future. Fees from Walmart+ memberships and advertising are expected to contribute 20% of the company’s operating income in 2025.

It could be a matter of sticking a Band-Aid on a business that is struggling in other areas (as Costco’s Galanti explicitly denied Costco would do) or retailers could simply be testing their limits before the price point scares away customers. According to him, retailers have a certain amount of slack before that begins to happen.

Since Costco membership is $5 a year, are you going to cancel it? This is a situation where they have a bit of leverage.”

Membership programs launched by companies other than warehouses more recently appear to be guided by competition as well.

For Target Circle Card holders, the first-year membership price is $49 for the first year, and $99 for everyone else. This is one dollar more than Walmart+, but still $40 less than Amazon Prime.

Professor Yuping Liu-Thompkins of Old Dominion University told Retail Brew that competition is definitely a problem. As of right now, [Target’s membership program] is still under Amazon’s membership, but they don’t offer as much benefit as Amazon does.

Thus, it’s a combination of what the competition is charging for these kinds of things, and what you’re offering that is comparable.”

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