Costco Increases Membership Fee; Wholesale Clubs Comparison

Oct 9, 2011 7:00am
gty costco nt 111007 wblog Costco Increases Membership Fee; Wholesale Clubs Comparison

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Shoppers take note: Costco announced this week it is increasing its membership fees by 1o percent starting Nov. 1, just in time for the holiday season.

Costco, which operates the largest membership warehouse chain in the country, will increase annual membership fees by $5 for its individual and business members to $55 a year. Fees for “executive members” will increase to $110 from $100, the company said on Wednesday during its fourth quarter earnings announcement.

The wholesaler implements a fee increase about every five years or so to keep up with inflation, according to Laura Champine, senior retail analyst with financial services firm Cowen Group. Membership fees account for most Costco’s profits, Champine said.

“They make very little money as a retailer,” she said.

For current members, the increase will take place after the membership contract expires.

Costco has 592 warehouses around the world, including 429 in the U.S.

Retail analysts expected Costco to implement a fee increase in May, but Champine said the retailer may have hesitated with the uncertain economy or watched how consumers responded after its competitor, BJ’s, increased membership fees.

In January, BJ’s increased its annual membership fee by $5 to $50. There are 191 BJ’s clubs in 15 Eastern states, according to the company.

Costco and BJ’s did not immediately return requests for comment.

Champine said Costco’s customer base is a “slightly higher end demographic” than that of BJ’s and another competitor, Sam’s Club, owned by Wal-Mart.

“So [Costco customers] are not going to feel the $5 or $10 increase. They have a lot more six-figure incomes,” Champine said.

Costco said the increases will impact just more than 22 million members, roughly half of whom are executive members. Along with the fee increase, the company increased the maximum 2 percent reward associated with the executive membership to $750 from $500.

Carrie Foster, spokeswoman for Sam’s Club, said the company has no plans to increase its membership fees. The last time Sam’s Club increased membership fees was January 2006, according to Foster.

Sam’s Club’s basic “advantage” membership is $35 for businesses and $40 for individuals, which also includes a second membership card for a household member. Its “plus” memberships for businesses and individuals is $100  and offers members discounts and earlier opening hours – 7 a.m. Monday through Saturday. The company also offers a collegiate membership for college students for $40, which includes a $15 Sam’s Club gift card.

Sam’s Club is offering $15 for a 15-week membership, with an additional card for a household member, for which U.S. customers must register by Oct. 10. Foster said the deal should take customers through the holiday shopping season.

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