Why Doesn’t Costco Offer Discounted Memberships Like Sam’s Club?

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Costco memberships at a reduced price are hard to come by. Read on to find out why that is. 

There’s a reason Costco charges members a fee to gain access to its network of warehouse club stores. Those fees serve as an important source of revenue for Costco, and they also allow Costco to offer competitive pricing on everything from groceries to cleaning supplies to apparel.

Right now, a basic Costco membership costs $60 a year, while an Executive membership costs $120. The higher-priced Executive membership gives you 2% cash back on all Costco purchases, including online orders.

If you’ve been looking to join Costco, you may be holding out for a promotion that has memberships going on sale. But that’s unlikely to happen anytime soon for one big reason.

Discounted memberships aren’t part of Costco’s business model

Costco isn’t the only warehouse club chain you could opt to join. Many consumers love Sam’s Club, which not only offers cheaper memberships to begin with, but commonly runs promotions that result in a lower cost for the first year of membership. Right now, for example, teachers can save 60% on the cost of a Sam’s Club membership through Aug. 17.

But if you’re hoping for a similar deal through Costco, you’re out of luck. Costco rarely, if ever, discounts memberships, and the reason is simple: It doesn’t need to.

Costco has seen its membership base grow through the years. And since it’s become clear that consumers are willing to pay full price for a membership, there’s little motivation for Costco to offer up discounts.

This doesn’t mean Costco doesn’t offer promotions. As a member, you might enjoy numerous savings opportunities throughout the year, from discounts on specific products to car-buying incentives through Costco’s auto program. But don’t expect to spend less than $60 on a basic membership or $120 on an Executive membership, because that’s unlikely to happen.

In fact, during a recent earnings call, Costco CFO Richard Galanti was quoted as saying, “The biggest thing that we don’t do is in any big way discount our membership…you can look at our competitors and see what they do. There’s a lot more promotional activity going on elsewhere. And we’re still getting, as I mentioned on the call, year over year 7% increase in new memberships.”

So clearly, a lack of discounted memberships isn’t hurting Costco from a customer growth perspective.

Should you join Costco at full price?

If you’re interested in joining Costco, you should expect to pay full price for a membership. But the savings you reap in return might more than make up for your yearly fee.

If you spend $60 a year on a basic Costco membership but save $100 on food and other purchases over 12 months, you’re ahead $40. So if you have a Costco store nearby and it’s feasible to shop there often, then it pays to give it a chance.

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Of course, if the idea of paying full price for a warehouse club membership doesn’t sit well with you, then you could always look at other options, like Sam’s Club. But Costco really does offer a unique shopping experience. So you may want to spring for a membership and at least try it out for a year.

Plus, right now, you can actually take advantage of a fabulous Costco promotion. Though you’ll still spend $60 for a one-year basic membership, you’ll score a $45 Digital Costco Shop card you can spend in stores or online, plus $40 off an online order of $250 or more. You’ll also get a promo code for a $100 Digital Costco Shop card when you spend $2,500 or more on a Costco travel package.

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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.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Gala. The Motley Fool has a disclosure policy.

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