As a membership-based warehouse club, Costco (cost) Different priorities than other retailers. Above all else, the chain must keep its members happy in order to keep replenishing. This is something the company is doing in increasingly large numbers.
“At the end of the fourth quarter, the renewal rate in the US and Canada was 92.6%, which is 0.3 percentage points higher than the 16 weeks before the end of the third quarter when we were at 92.3%. Our global renewal rate at the end of the fiscal year was 90.4%, up 0.4 percentage points from the end of the third quarter when it was 90%, CFO Richard Galante said during the retailer’s fourth-quarter earnings call.
That’s an incredible loyalty that Costco earns through a combination of low prices and very good treatment of members. A chain always thinks of its members first and that’s why a big change will happen (eventually) and no other change will happen.
Costco will raise the price of its membership
During the call, Galante spoke again about the possibility that the chain would increase the price of its membership. It was widely reported that Warehouse Club did not raise prices, but that’s not really what the CFO said.
“Sure, because we’ve historically increased member fees every five or five and a half years, we’ve turned them around and used them to drive more value,” he said. “And whenever we do that, we’ll do it. I think at the end of the day, it’s — and I also want to point out, of course, if you look at the last three increments, on average, they were five years and seven months apart. If you look at June of ’17, plus To five years and seven months, you’re roughly talking about January 23.
This isn’t Galante saying that the price increase won’t happen, it’s actually pretty much a guarantee that it will happen, but it leaves the timing vague,
“Now I’m not suggesting it’s January 23. I’m just saying it’s not there yet anyway. Our point is, are we confident in our ability to do it. And at some point, we will, but it’s a question of when and not if.”
Costco will not change this membership
Costco has two types of memberships for family members. It offers a $60 basic membership and $120 executive membership that comes with 2% cashback on most purchases up to $1000 per year.
During the call, Galanti was asked if the series would add a third category.
“You’re going to leave the Gold Star where it is, take the executive position, and maybe add the Executive Plus, right, it either has more than 2% or some other feature, right? So you’re catering to people across the income spectrum,” Guggenheim Partners analyst asked John Heinbuckle.
Galante was very decisive in his response.
“You know, John, I think we’re trying to keep things simple. We talk about all kinds of things, but we always go home and say, ‘Let’s do this and simplify it.’ For sales tax in some states that are not currently subject to sales tax, but at a certain level, states say they are subject to sales tax, not just the increase, but the entire membership fee,” he said, “that’s something we’re considering as well. At this juncture, I think we’re We’re still moving towards simplicity.”