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Is Costco membership still a good deal?

The warehouse store is raising its membership fees for the first time in 5 years.

By Karen Datko Oct 5, 2011 3:26PM

Groceries have been putting a bigger dent in your checking account, and now so will the privilege of buying them in bulk at America's largest warehouse store. Costco is raising its membership fees by 10%.

 

Some basics:

  • U.S. individual (Gold Star) memberships and business memberships in the U.S. and Canada will cost $55 a year, up $5.  It's the first fee increase since 2006.
  • Executive members, who earn cash back on what they spend in the stores, will pay $110, up by $10, the first fee increase for them since 1997. Also, The Seattle Times reports that "the maximum 2% reward tied to the executive membership will rise from $500 to $750."
  • The higher rates go into effect Nov. 1 for new memberships, so if you're planning to join, do it now.
  • For current members, the higher rates take effect whenever they renew after Jan. 1.
  • All told, 22 million members will be paying higher membership fees.  
  • BJ's Wholesale Club increased its membership from $45 to $50 in January. Sam's Club's is hanging steady at $40, The Wall Street Journal reports.

Will people drop their membership because it costs more? Costco doesn't think so. The Seattle Times quoted Costco chief financial officer Richard Galanti:

"Historically, we have very little falloff from it," he said. "We don't take it lightly. ... Every time we do it, we look at ourselves in the mirror and figure we've increased the value of that membership by more than that. Maybe we're fooling ourselves, but we don't think so."

What do consumers think? An online poll at The Street registered 168 voters who said the higher cost is worth it, and 154 who said they'd shop somewhere else. No comments were left, last time we checked. Mass outrage over the price increase was not apparent in other locations -- even at Costco's Facebook page.

 

A few called the company "greedy" and a slave to Wall Street's expectations. There is a bit of truth to that. Reuters says:

While the increased fees could add 20 cents to 25 cents to earnings per share over the next two years as memberships are renewed, Janney analyst David Strasser expects roughly half of the fee increase will be used to hold down prices.

Other Facebook posters said if you don't like it, you know what to do. Kristin Kauno said:

… I have been a customer since day 1 and I think the fee was only $40. Now 20+ years later it will be $55 and worth every penny! You can easliy shop elswhere if you don't like it and think you can save more money somewhere else.

An online discussion we found was also tame. "Since that's less than an extra 42 cents per month, I think I will be renewing my Costco card even if it does go up to $55 per year. It's still worth it to me," one commenter said.

 

A  former member, I'd happily pay the higher fee if I still had a Costco nearby. You'll still save money if you apply some basic tips: Post continues after video.

  • Check the unit price. You really have to know the unit price to compare what you would spend at Costo vs. other stores and see how much you'd be saving (or not). 
  • Don't buy more than you can store or use before it goes bad.
  • Stick to what you need. However, I must say that the hugely discounted waterproof Sorel boots I hadn't expected to buy are still my standard winter shoes 12 years later. Sometimes you have to be smarter than your shopping list.

Costco is doing brisk business, by the way. U.S. sales in the fourth quarter were up 10%. But not all the news was sweet. Bloomberg says:

The retailer's profit margins have narrowed this year as costs climb for gasoline and food items such as coffee and cheese. The company said the rising cost of inventory reduced profit by $32 million, or 4 cents a share, last quarter.

More on MSN Money:

145Comments
Oct 6, 2011 9:16AM
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Madinnc, you're a idiot if you really think all this mess is Obama fault, you really should stop watching FOX, both partys are at fault, and the Wall Street Protesters are a REAL GRASS ROOT MOVEMENT, unlike the Tea Party!
Oct 5, 2011 10:38PM
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Greed will sink them., They have already raised the prices on their products, and now this. I can find much better bargains on the Internet without a Costco Card at Amazon, Tiger Direct, and Overstock .com, even Fry's Electronics have better deals than Costco. You just have to shop around and shop smart.

Why pay a company to shop at their stores. They should be offering you discounts to get you to shop at their businesses imo.

As for food, my local shops, Walmart or even on Amazon offer much better bargain prices. I don't have to hand out money to Costo to shop. I can do it free everywhere else.

Oct 5, 2011 10:39PM
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I won't be renewing my membership. With some research I have found other alternatives that are more cost-effective. The only real reason I had a membership with Costco was for convenience. I expect this move will negatively affect their business model.
Oct 5, 2011 11:25PM
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Costco is great for mass retailers who want to buy their goods at Cosco but for a single person or a smaller family, it is a rip-off.  Costco prices are no cheaper than elsewhere and sometimes more.  And if you are not a massive  eater, you end up throwing half of what you buy away because it goes bad before you can finish it (fresh fruit)  or you simply throw it out because you get tired of eating the same thing day after day.  Cancel my membership!
Oct 6, 2011 9:01AM
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Why aren't people demanding a march on wall street denouncing the evil capitalistic Cotsco?  Food prices go up, grocery stores charge the consumer more. Duh.  Dem. Govt. regulations on banks cutting the amount they can charge the store owner per transaction, banks find a way to recoup those losses. Duh.  Govt. taxes small businesses, small business owners have to lay people off.  No brainer.  I am so sick of stupid people that just don't get it.  Get rid of Obama and the Dems that have no clue as to how our economy works.

Oct 6, 2011 9:33AM
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Why are people comparing Costo to Sam's Club???  Thats like comparing Walmart to Macys.  Costco is a higher end wholesale warehouse selling some of the same, but mostly better quality food and merchandise.  If there is a Costco relatively close to you, it is definitely worth the membership depending on what you are buying.  I would happily pay the higher membership because I save ALOT everytime I shop there.  They have higher end name brand clothes also. I get my kids REAL DOWN JACKETS for $39 and Marc Jacobs down coats for me for $69.  I saw these same coats online at other retailers for over $150!  Costco is in a class by itself.  If you are squawking over $5 or $10, you obviously dont see the value and you can shop other places for free!

Oct 5, 2011 11:24PM
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We will continue to use and shop at Costco.  Their customer service is far superior to Sam's.  Their people are friendlier, and they are also closer to us.  THIS is a $5 fee I don't mind paying.
Oct 6, 2011 11:36AM
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Yea, real grass roots when the unions are paying people to show up.  These people have no idea what they are protesting (the cost of broccoli? - PLEEEASE.).  At least the tea partiers have conviction in there beliefs are peaceful and coherent.  Rich49, maybe you should stop watching Al Sharpton and Matthews and school yourself on economics by doing your own research.  Research Barney Frank and bank regulations.  See what he did in the 90's, making the banks approve loans for people who obviously couldn't afford them. My business pays $6000 a month in unimployment taxes, to pay people to sit at home.  How does that help the economy.  Yea, I had to let workers go, just to pay the tax.  The govt. in Washington are the idiots.  You guys have no clue.
Oct 6, 2011 9:42AM
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Costco & Sam's are very much alike and I find the quality at Sam's the same or better than Costco.  MANY of the products are exactly the same & Sam's in my area has MUCH better meats and by far a larger selection of cuts.

 

I don't need any fancy foods...I can make those myself if I so choose....SOOOOO, I won't be renewing my Costco membership.  Sam's carries many more products I use.  To shop at Costco I have to drive at least 70 mi. one way & I have 2 Sam's within 45 mi. in 2 different directions.

They were already $10 higher on their membership fees than Sam's....nope, not gonna stay with them.  I prefer down to earth products...NOT high end!

Oct 6, 2011 12:17PM
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The only thing that is cheap is the hot dog and soda.  I don't need a membership to buy. (in most places).  Some will tell you it is the gasoline.  That isn't true I have seen gasoline stations across the street to be the same price or cheaper.  I don't need a card!  My wife and I cards will cost two hundred and twenty dollars a year.  Even if I went to costco five times a day to stand in line for samples it still wouldn't cover the cost of the cards.  As for Sam Club is the same price that I would get at any Wal-Mart.  The only bulk store I would recommend is Smart and Final. No membership required and prices are cheaper. The major problem with Costco is HERE TODAY GONE TOMORROW.  Brain dead will continue to pay ask Bank of America they are counting on it. 
Oct 5, 2011 11:55PM
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If you have a lot you will consume a lot..this is human-animal nature..Costco contributes to the obesity along with fast food and not being active in our day-to-day lives..Costco is good for restaurant owners or other types of businesses. Not a good idea for families..Buy from farmer's markets, Trader Joe's, local grocery stores, and etc..The savings you get from Costco is not worth it..do an honest calculation and you will know..
Oct 6, 2011 9:53AM
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We will still shop at Costco as we get far more from it than groceries.We have enjoyed this every weekend with a few exceptions for 15 years.Its our entertainment and we never get tired of it as it changes weekly!We love,love,love Costco.If you look in our house and the grand childrens houses you will see we buy alot at Costco,so $5.00 more is no biggie for us and am happy we can afford it!All who havent tried it should try it,especially at Christmastime,its a blast!!!
Oct 6, 2011 10:18AM
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Hmmm........ Let's think about this. $55.00 membership at lets say 20 million members that is over $1 billion dollars a year Guaranteed profit for Costco. They are not stupid by no means. It's all the idiots out there who contribute to their wealth that join each year. Shame on them for making COSTCO so rich.   SERIOUSLY THINK ABOUT HOW MUCH CLEAR AND REPEATABLE PROFIT THEY ARE MAKING OFF YOU!!!! This is why I will not join any clubs like this. It is not reflected in any retail pricing savings.
Oct 6, 2011 1:11PM
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I have been a member for 26 years and Costco could give a rats rear end!!! At 25 years I thought perhaps they might say--- "THANKS"  but nothing.

 

I will not renew my membership. Has ANYONE totaled up what 22 million customers @ $55.00 is?

 

P U R E    G R E E D   as is rampant in MOST all businesses today!!!

Oct 6, 2011 12:50PM
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In the news Costco's profits up 11 % so they raise the memberships fees 10 %??. Do they respect their customers ?? I've done a lot of price comparisons between Costco and sales of other stores. Costco rarely beats the sale prices. Many times their more expensive. Only savings is on OTC drugs. Not worth the increased memberships fees. I will not renew. I want to save money and not feed their CEO's excess income.

Oct 6, 2011 7:37AM
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 Costco offers tremendous bargains for people who need a larger quantity. Costco's ceo is reletively low paid, Costco's employees average better than $18 an hour in wages vs. Walmarts less than $10. If you cant afford the 5 bucks dont sign up they'll do fine without you.
Oct 6, 2011 11:54AM
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I will be cancelling Costco and going back to Sam's Club. I liked Sam's better anyway. Costco isn't worth it anymore as their selections never change or improve.
Oct 5, 2011 10:25PM
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If you compare prices at member shopping clubs with sales at grocery stores there isn't much of a difference.  When you figure in membership fees, which is pure profit, the savings aren't as attractive.  If I didn't get my memberships in Sam's Club and ****'s through my fathers business I wouldn't be a member!
Oct 6, 2011 12:17AM
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I agree with all that say that these 'clubs' are not really all that great ... take CHICKEN for instance.
I buy chicken breast, which is ON-SALE every week at either Path Mark, Shop Rite or Stop&Shop,
for $1.99lb ... NO WAY that these clubs even come close to that. Milk and eggs are a good deal but the bottom line is their prices are only 'OK' and you can find MUCH BETTER DEALS if you look for sales in your local supermarkets ... and you don't have to buy a truck-load of product ... Also specific to Costco ... what's up with them not taking Visa or MasterCard ...??? I wouldn't join just because of that alone ... I belong to ****'s because a friend of mine works there and I got a FREE MEMBERSHIP ... otherwise I probably wouldn't belong to any of them ...

Oct 6, 2011 9:31AM
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I think you are all missing the point, if you shop at Costco you are shopping there because you like the store.  You like the good prices, you like the products.  Let's face it they have great stuff.  You are hard pressed to find more beautiful produce in any local grocery store. The rotisserie chickens are cheaper than most grocery stores and bigger, most of the time.  The meats are the best, not the cheapest but the best.  In the scheme of things the $5.00 isn't going to break anyone. I will still shop there and love it.
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