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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.

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