How Does Costco Work?
When Costco first opened its doors in the 1980s, its business model was unlike any other big-box retailer. While it offered a wide variety of products like Walmart or Big Lots, to shop at Costco, you had to be a member.
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Annual membership fees ensured that the stores weren’t overrun and product prices stayed low, and generally, people were happy to pay a small fee to enjoy Costco’s seemingly unlimited and affordable options.
Costco’s Stellar Reputation
Over the years, Costco has maintained a fantastic reputation among its millions of customers. People love the affordable prices, bulk options, food court, and variety of products the giant warehouses provide.
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However, because Costco’s low-price model is one of the most enticing aspects of the brand, any time prices increase, even marginally, the company faces substantial backlash.
Costco’s Membership Prices Over the Years
In 1983, an annual Costco membership cost only $25. In 1992, the fee increased to $35, then to $40 in 1997. By 2005, the fee increased again to $50 and in 2017, Costco raised the price to $60.
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Now, Costco has announced that the new Gold Star Membership, which is the most basic package the store offers, will cost members $65 per year starting on September 1, 2024.
Costco Increases Executive Membership Costs
Additionally, the company explained that its Executive Membership customers, who pay slightly more to receive 2% rewards on purchases, roadside assistance, travel benefits, the Costco Connection Magazine, and added discounts, will also be paying more.
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Executive Memberships previously cost customers $120 every year, but now, they will pay $130. However, the maximum annual 2% reward members will also increase from $1,000 to $1,250.
Costco Says It Increases Membership Fees “Every Five Years”
Costco’s Chief Financial Officer Gary Millerchip noted during an earnings call in May 2024 that membership fees increase “every five years or so.”
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And historically, that’s fairly accurate. Membership fees have increased every five to twelve years over the past four decades. So, in theory, since the last price jump was seven years ago, this increase shouldn’t really come as a surprise.
Why Is Costco Increasing Its Membership Fees?
The company works tirelessly to keep membership fees as low as possible. However, it does increase the prices in direct correlation with inflation.
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And since inflation is unquestionably higher than it was in 2017, it makes sense that the executives felt it was time for an increase.
Costco Held Off on Increasing Membership Fees to Help American Consumers
In fact, inflation had already increased substantially by 2022, and Costco certainly had a legitimate financial reason to increase the cost of annual membership fees.
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But at that time, Costco’s former CEO Craig Jelinek explained that the company was waiting to raise membership costs to help customers manage the growing cost of living.
Some Blame Costco’s New CEO for the Price Hike
However, Craig Jelinek was replaced as CEO by Ron Varchis in January of 2024, and it seems Varchis believed it was finally time to increase the membership fees.
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To which one customer complained, “So disappointed that @Costco is raising membership prices. Of course, that’s the first thing the new CEO does. We should’ve known.”
Some Costco Customers Are Disappointed by the Price Hike
Of course, this customer isn’t the only person who is disappointed in the Costco membership price hike. In fact, some even said they won’t be renewing their memberships.
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One wrote on Facebook, “I’m done then,” and another said “I won’t be renewing.” Others expressed, “They will never get another dime from me,” and “That’s one reason I switched to Walmart.”
Costco Uses the Membership Fees to Keep Product Prices Affordable
However, many other customers wrote that the price increase was both expected and completely fair. One wrote, “Isn’t it increasing 5 dollars per year? People spend more on a small cup of coffee or ice cream,” and another says, “Costco please take my money!”
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And the truth is that, because Costco has 73.4 million US members, the mere $5 extra per membership means an additional $367 million in annual income. And that will help ensure Costco’s prices stay as low as possible.
The Costco Hot Dog Price Will Stay the Same
Yes, Costco will make millions more on the new membership fees; however, customers are essentially paying the cost of one small coffee over the course of the year to enjoy the big-box retailer’s wildly low prices.
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And that includes the beloved Costco hot dog, which is still only $1.50 with a 20 ounce soda, and according to Costco, it will be “forever.”