Aussie Sphere

Costco Customers to Cancel Memberships? Discount Retailer to Hike Membership Fee


According to media reports, discount retailer Costco is planning to jack up membership fees to recoup the hike in hourly wages. How the customers will react to it is a matter of conjecture and some customers cancelling the membership can be a probability.

Costco hinted that its hike in membership fees is in the cards, the first time since November 2011.  The hourly wage revision in Costco happened in March. It raised the hourly wages to $13.00 an hour from $11.50. That was the first increase in nine years.

Speculations are rife that the annual fee for basic Gold Star Membership will increase to $60 from the present $55 and the Membership price will go up to $120, reports The Street.

According to UBS analyst Michael Lasser, the hike may take effect from early 2017 and quoted the retailer’s CFO to validate it.

“As it relates to a fee increase, we really haven’t made any decisions — history has shown that if you just dot it out chronologically, it’s [fee increases occur] about every five to six years, and the last time we did it was in January of 2012, so five years would be January of 2017 and six years would be a year later,” said Costco CFO Richard Galanti.

In the fiscal year that ended on Aug 31, 2015, Costco generated $2.5 billion in membership fees from 81 million members and notched up 2.2 percent in total revenue.

Market research firm IBISWorld made a positive forecast that the retailer’s market share will soar in the next five years. This will be an offshoot of more retail stores and consumers warming to the membership model for buying a diverse range of low-cost products.

In Australia, Costco has 150,000 members. Costco Australia spokeswoman did not confirm such the membership fee hike and instead stated: “It hasn’t changed since 2009.”

In Australia, Costco has eight warehouse stores and three more are planned in 2016. They will come up at Marsden Park in Sydney, Brisbane, and Victorian suburb Epping.

According to Australian managing director Patrick Noone, Costco’s next target would be “second-tier cities” such as Newcastle, Wollongong, and Darwin.

In the last financial year, Costco Australia showed up an impressive performance with sales increasing from $878.51 million to $1.3 billion, Newscorp reported.

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