Costco, the popular warehouse store known for the variety of items it sells at low prices, has just gotten a little more expensive.
The company said this week it will raise its basic membership fees by $5 starting June 1, putting its “goldstar” individual membership, business and business add-on memberships at $60 per year, up from $55. Executive memberships will now cost $120, up from $110. But with that increase, Costco is also raising its maximum annual 2% reward to $1,000 from $750 for that membership. This is the first time Costco has increased its membership since 2011.
The increase shouldn’t be a problem for the most diehard Costco customers, said Sucharita Mulpuru, chief retail strategist at Shoptalk, which hosts commerce events. The shopper who could afford the former $55 annual fee and the average cost of a Costco basket at check-out is already an affluent customer, she said. “These are customers who will pay $5 for a latte and not think twice about it,” she said. “I just don’t think they’ll drop their Costco membership because of this modest price increase.” (Costco said the price increase will affect about 35 million members. The company did not immediately respond to a request for comment.)
Many shoppers, particularly those with large families, are likely to save enough over the course of a year to offset the $60 cost, said Courtney Jespersen, a retail expert at the personal finance company NerdWallet. For instance, Costco offers significant discounts on its pharmacy items for members, said Brent Shelton, an online shopping expert at deal aggregator FatWallet.com. ( Sam’s Club also has a pharmacy for its members with about the same discounts as Costco’s, but membership for that program costs $100 per year.)
“If you or your family are in a position that you require a lot of prescription medicines, then a Costco membership can be one of the most valuable investments you’ll make,” Jespersen said, noting that even with insurance, not all prescriptions are covered for consumers. Diapers, wipes and formula are some of the other products that prove most cost-effective, and bulk-buying obviously means parents need to take fewer trips to the store.
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Costco also offers items other big-box stores do not, including gasoline, and even car rental discounts and vacation packages through Costco Travel, which is available to all members, Shelton said. Tires, wine, movie tickets, Nutella, gift cards, Extra Virgin olive oil and pure vanilla extract are some of the best deals at Costco, said Kyle James, the founder of the coupon and deal-finding site Rather-Be-Shopping.com.
Others say shoppers who might already have been on the fence about whether their membership might want reevaluate, Jespersen added. After the price increase, Costco will be $15 more than rival $45 Sam’s Club’s standard membership (which doesn’t include the pharmacy discounts) and $10 more than the $50 membership at BJ’s stores.
Sam’s Club online also has a partnership with the cash-back site Ebates, offering shoppers 1.5% cash back, whereas Costco does not participate in that program, Shelton said. If shoppers aren’t going to use Costco as their primary store, “You may want to think twice if you’re going to get the value back out of it,” Jespersen said. After all, big box stores Target and Walmart don’t require memberships.
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And not everything you buy at Costco or other warehouse stores will necessarily be cheaper, despite the reputation for low-cost prices, MarketWatch reported last year. Meats, such as bacon and chicken breasts, are often great buys at warehouse clubs (freeze whatever you don’t use), as are some kitchen appliances, but books, compact discs, and DVDs are often cheaper online; and condiments and perishables will obviously spoil if you don’t use them early.
With or without memberships, some studies show that when you spend time in stores and touch the products, you are actually more likely to buy them. Merely touching an object results in an increase in perceived ownership of that object, one University of California, Los Angeles study found. “If you think everything’s a good deal, you might be tempted to overspend,” Jespersen said. And Costco isn’t the only retailer that offers deals, so consumers would likely benefit by shopping around before making a significant purchase, Jepsen added.
And fewer people appear to be want to visit standalone big box retail stores, a December 2016 report by consulting firm Deloitte found. The number of those who said they planned to shop at big box stores during the 2016 holidays fell to 59% from 63%. And it’s not just big box stores: Those who plan to visit traditional malls fell to 50% from 53% over the same period. “Online shoppers are not just browsing either,” the report said. Those polled said they plan to spend just as much online as they do in physical stores.