4 Reasons Costco Will Never Raise Membership Prices by More Than $20 a Year

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Costco could raise membership prices soon. Based on Costco’s history and overall business operations, here’s how much we think that price hike could be. [[{“value”:”

The past few years have seen fast-rising grocery prices and more expensive costs of seemingly every aspect of daily living. But one price has stayed the same: Costco memberships still cost $60 per year (or $120 for Executive memberships).

However, just like every publicly traded company, Costco needs to be profitable and drive growth. Raising membership prices is one easy way that Costco’s leaders could — if they choose — try to make more money.

Is the price of a Costco membership likely to go up soon? If so, by how much? No one knows for sure, but in this Costco member’s opinion, Costco is highly unlikely to raise prices by more than $20 per year.

Here are a few reasons why Costco membership prices probably won’t go up by more than a few dollars per year.

1. Costco doesn’t raise membership prices very often

It’s easy to lose sight of this, when so many other items at stores have gotten more expensive during the times of high inflation, but Costco has not raised its membership prices in a long time. According to CNBC, the last time Costco raised membership prices was in June 2017 — seven years ago!

Seeing as how Costco has never raised the price of its $1.50 hot dog and soda combo meal, it seems like this company is reluctant to impose price hikes on its customers. The fact that Costco has gone seven years without raising prices on memberships is a sign that any future membership hikes won’t be too severe.

2. Costco’s last membership price hike was only $5

And speaking of that Costco price hike, the June 2017 increase only added up to $5. The standard Costco Gold Star membership price increased from $55 to $60, and the Executive membership price went up from $115 to $120.

When you consider the hundreds (or thousands) of dollars of extra savings and value-added services you can get in one year from a Costco membership, a $5 price hike is worth paying. Will a future Costco price hike be only $5? Possibly, but even if it’s more than that, I would be surprised to see Costco raise prices on memberships by more than $10 per year. That’s because…

3. Costco likes having loyal customers

I just checked the card in my wallet — I’ve been a Costco member for 20 years! Most Costco members, like me, love Costco and keep renewing their memberships year after year. Costco has said in its annual report that it has a 90% membership renewal rate. That kind of customer retention and customer loyalty is hard to find in any industry.

Instead of nickel-and-diming customers with annual price hikes on memberships, Costco is adopting a strategy of focusing on customer loyalty. Costco would rather keep you happy and stay in a long-term committed customer relationship with you (and your bank account) instead of driving you away with short-term price hikes.

Costco’s high membership renewal rate is another big reason why any price hike in membership fees will likely be limited to less than $20 per year. Some Costco members are more price-sensitive than others, and suddenly getting charged an extra $30 or $40 (or more) for their Costco membership renewal might feel too painful.

4. Costco has lots of goodwill for keeping prices low

This last reason is intangible and hard to measure, but it’s real: Costco has a brand reputation for generally trying to do the right thing and treat people well — customers, employees, vendors, and other stakeholders. One reason why people shop at Costco is that it feels “good” to shop there; the prices are low but the quality is high, and the company has a good reputation.

If Costco tried to squeeze more short-term profits out of its members by raising membership prices too high, too fast, that could damage Costco’s reputation for being a customer-friendly company. It takes time, money, and effort to build a good reputation as a corporate brand. Damaging the brand can cost a company (and its shareholders) far more money than any short-term spike in revenue from higher membership fees.

Bottom line

It’s ultimately up to Costco’s executive leadership team whether to raise membership fees — and how much. But as long as Costco can keep achieving 90% renewal rates from its members, and based on Costco’s history of only rarely and slightly increasing membership fees, it’s more likely that Costco will keep any future membership price hikes limited to under $20 per year.

Making sudden, drastic increases in membership prices would be out of character for how Costco does business, and for what people expect from the Costco brand.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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