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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 11:27AM
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Let's see who is more idiot here:
An idiots who pay the extra $5 for Costco membership, or,  the one who pay $5 for a coffee at starbuck? 

Can anybody deny that  Starbucks is still in business because of idiots?
Oct 5, 2011 10:48PM
Oct 6, 2011 8:54AM
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Hi

We're a retired couple that occasionally buys supplements & food items we enjoy from Costco.  So our purchase at each visit isn't all that much, which makes the worth of the membership fee questionable.  It would be a blessing for us seniors to be offered a discounted membership that would apply to nutritional/health (food, supplement & OTC) purchases only.  

Would Costco please consider a discount rate for senior membership.  It would be appreciated.

Sincerely,

bgg

Oct 5, 2011 5:21PM
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Costco rarely raises membership fees and offers great buys.  I have no problem with it. 

 

Can't say the same for Bank of America who offers nothing in exchange for a $5 charge to spend your own money.

Oct 6, 2011 12:45PM
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Does anyone remember "GEMCO" back in the day? I remember when I was a kid going there with my parents going through the turn stile having to show our card. They had to pay for their membership too a lifetime membership I believe it was a whole dollar. It was an amazing store. Then a hostile take over of Lucky stores then it became Target Stores. No more one stop shopping till Costco came about then Costco became a hit along with Sam's club which ever came first. Who's counting at this point. But who cares?

Think about it people!! .. We are PAYING to SHOP !

                                            We are PAYING to WATCH TO TV

                                            We are PAYING to USE OUR MONEY

                                            We are PAYING to CARRY OUR LUGGAGE

                                            We are PAYING to FILL POCKETS OF MILLIONAIRES &
                                                                                                                 BILLIONAIRES

Next will be charged to PAY ATTENTION if we don't start standing up and doing something about it instead of griping about it.


You can find food cheaper at other outlets and you can find gas as cheap if not cheaper at other places as well.

Oct 6, 2011 2:03PM
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Funny how many of the people complaining about $5.00/year are also sitting in their SUV's, drinking their $5.00 $tarbuck$ complaining about $4.00 gas.

 

At least Costco gives you something in value for return of your membership fees.  If you feel they DON'T and you have a membership, then the validity of your complaint is the same as your reasoning.   If you don't like Costco then:

 

Go to Bank of UNAMERICA who will start charging many of their customers up to $60.00 per YEAR just to SPEND your money (Debit Card).

 

"Oh, I'll just use cash."  That works well for online purchases.  That also works well if you want to buy a $2000 item and your ATM limit is $300/day.  And, when you go into the branch to see a teller to withdraw your $2000, hope you don't have one of those "online only" basic accounts that you will pay $8.95 to GET your money from a teller.

 

And we complain about $5.00 a year FEE increase, in 5 years.  If you can afford to shop at Costco, you can afford $5.00.  If you can't afford $5.00 a year, then I can hardly see how you can afford a Costco Membership in the first place.

 

Get over it and find something worth complaining about.  Like the stupid idiots back in Washington who are ruining this country, or the stupid idiots on Wall Street who predict what Costco "Should" earn in a quarter, and when they don't, they SLAM it left and right as a failure, which in turns causes Costco to figure out how to raise additional bottom line profit so they can MEET what these "analysts" EXPECT them to earn at whatever costs are necessary.

 

CEO greed?  Compare the entire compensation package of Costco's CEO versus CEO's from:

 

CISCO, Bank of America, YAHOO (9 million for getting fired) and other companies. All who have LAID off THOUSANDS and THOUSANDS of people.  How many has Costco laid off in this recession?  Oh, yeah.  They HAVEN'T.

 

Hmm.  Maybe I should join the protestors against Wall Street GREED and CORRUPTION.  Business having to make decision (layoffs, raising fees, etc..) in order to SATISFY what those fat pig-headed pricks THINK a company should make.  Gee, maybe they have a POINT.

Oct 6, 2011 2:18PM
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We are rethinking our Costco membership for one reason - the deals are not that good. I went to Costco with the unit prices of same or similar items at area grocery stores, and found that my local grocery store actually had better deals 75% of the time. UNIT PRICE is what you need to check.  Don't just assume that because it's in bulk, it's cheaper. This is true for grocery stores too. I've watched people grab the larger item of something, assuming it's the cheapest, when the unit price clearly shows that buying two smaller packages of the same item is the better deal. DON'T ASSUME - LOOK AT THE UNIT PRICE!

Oct 6, 2011 3:41PM
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A 10% increase over a period of nearly 15 years is hardly news to be reporting on.

Anybody who doesn't know whether or not Costco's value proposition makes sense for them shouldn't have become members to begin with.

Even if Costo didn't offer a specific cost or prices advantage, the general quality and reliability of their merchandise and customer service is well worth the price of admission alone.

Anybody who doesn't find membership to be worthwhile can receive a full membership refund - or better yet, not become a member in the first place.
Oct 6, 2011 8:46AM
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My wife and I shop at Sams Club and have noticed that their pricing is not always that great. We have found their own WalMart to be cheaper on some items. My question has always been, why do these places even have member fee's? Are you getting a good deal because you buy in bulk?

What happens when the price drops and you bought a lot of something at the wrong time?

Did you not just pay more then you would have if you had bought less? I have noticed that electronics is not all that great, much of it is older stock from discontinued models. Some of which does not get discounted as much as elsewhere on the internet. At least in my experience with Sam's club not everything is worth the membership. You have to still be a smart shopper.

Oct 6, 2011 11:41AM
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Shop where ever you get the best VALUE. Just be sure to check the label, and if it says China, put it back and walk away. Value is so much more than just a price tag; retailers pocket much more selling China crap even at a lower price, and in the long run it ends up HURTING America.
Oct 6, 2011 3:12AM
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I'm pretty much done with Costco. I think it's silly  to have to be a membership fee, when their prices aren't even that great. If you look for specials in other non fee charging stores and do some shopping at smart in final you won't miss costco at all.
Oct 6, 2011 12:32AM
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Costco isn't for everyone; a lot of comments on this thread indicate that people just plain don't know how to shop there, or don't value the things Costco customers value. But for those of us who buy in bulk (and in our house, it's only two of us--it's not just for big families or corporations), who care about quality, who insist on good customer service, and who enjoy saving money over most other shopping venues, nothing really compares.If you don't care about those things--or can't figure out how to make a Costco membership pay off, by all means, shop elsewhere.
Oct 6, 2011 4:32AM
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I canceled my membership last month. After deciding to give them a try a year ago, I didnt find much savings on most products then if I was to buy at Walmart, or the local grocery store when they have a sale of certain items. I save more buying less at other locations then buying more at Costo. You are suppose to save by buying in bulk and I just see it. Only about 10% of their products spread out around the store is any type of savings, everything else cost the same or more then shopping elsewhere. Both Costos and BJs is a joke.
Oct 5, 2011 4:57PM
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Costco is great if you don't mind eating tons of food and paying for the privledge of walking into their warehouse.. I had a Costco card until they raised the price of membership and then I decided to go elsewhere. I found same pricing at Smart and Final without the cost of membership. Much better deal.
Oct 6, 2011 11:30AM
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Where did we go WRONG?! Since when I the consumer have to pay a Retailer to give me good price on a product that I buy from them?! What happen to the Retailer have to compete for my business?! America … What are we getting ourselves into?! I pay to get a good price?! No wonder we ARE in an economical crises …

Oct 6, 2011 7:07AM
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I think what bothers me the most is that if they need to raise Membership to continue to offer good products at good prices because of rising costs then I support it, but when they raise prices to support dividends to stock holders or keep bonuses for Upper Management, then its not fair.

 

Why should consumers pay more in this economy so executives can get bonuses or stock holders can get more dividends?  Doesn't that just inflate pricing without providing consumers more value for what they pay?

Oct 6, 2011 1:07PM
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My wife and I have been carrying both a SAMS Club membership and a Costco membership for some time.   We may just go with SAMS Club from now on.  There is little difference between the stores and what they offer.
Oct 6, 2011 11:14AM
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In a bad economy, Costco should be LOWERING membership fees.  Sounds like the investors are getting greedy.   Rich people are all the same.
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 6, 2011 4:57PM
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the one plus for costco is the extra year warranty on electronics.
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