Costco will hike membership prices (blame Walmart’s Sam’s Club)

Costco will hike membership prices (blame Walmart’s Sam’s Club)
Costco will hike membership prices (blame Walmart’s Sam’s Club)

walmart (WMT) Sam’s Club just made the most conservative price increase any company could achieve. The warehouse club has increased its base membership from $45 to $50 per year and its “Plus” membership from $100 to $110.

But, because the company understands the optics of the price increase at a time when consumers are hyper-aware of rising costs, the increase comes with a pretty big caveat. Sam’s Club will offer existing members $5 or $10 in “Sam’s Cash,” essentially a gift card, when they next renew.

The move softens the blow of the increase and allows the company to raise prices for the first time in nine years for Regular members and the first time since 1999 for Plus members without causing a backlash.

Yes, new members who join after the increase takes effect on October 17 will pay the higher prices, but anyone planning to join now has about six weeks to join before they have to pay the higher price. raised. This is Walmart making a very smart move in the long run that will minimize the impact on customers, which should limit, if not eliminate, the rise in churn.

It’s also a move that paves the way for the company’s main rival, Costco. (COST) to do the same.

Costco Addressed Membership Fee Increase

Costco generally raises its membership prices every five and a half years. The channel last raised the cost of membership in June 2017, which puts it roughly in the stage where it would communicate an upcoming price increase to members.

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Currently, a Costco Gold Star membership costs $60 while an Executive membership, which offers a 2% discount on most purchases (up to $1,000 per year), costs $120.

Costco senior vice president of finance Bob Nelson, replacing vacationing chief financial officer Richard Galanti, discussed a possible price increase during the warehouse club’s third quarter earnings call.

“As we approach that five-and-a-half-year mark, there will be more discussions with Craig, Ron and the management team,” he said. “But for today, we don’t have anything more specific to report in terms of timing. Additionally, given the current macroeconomic environment, historically high inflation and the burden it places on our members and all consumers in general, we are considering increasing our membership. fresh today ahead of our usual timing is not the right time.”

Costco will probably (and should) increase its membership fees

Costco, like its rival, has been very wary of increasing the burden on its customers during an already financially difficult time. Sam’s Club raising its prices gives the chain some cover for its own raise, and offering a similar “cash back” incentive that makes the first raise not really a raise at all is a decision that the company could copy.

It makes more sense, however, for Costco, which still charges more than Sam’s Club for both levels of membership, to announce an increase that will take effect after the holiday season. This would give the company a more level playing field with its rival in the fourth quarter while enticing potential new members to lock in current rates for the next 12 months.

It’s hard to argue that Costco and Sam’s Club don’t offer members great value for the price of a membership. Both face higher costs and a slight increase in membership fees is more than justified. Both chains are right, however, to approach the idea with caution and give existing members plenty of notice.

Realistically, while the extra money has a significant impact on bottom lines for both chains, its impact on customers – even in tough economic times – is very minimal. That’s why Sam’s Club won’t get much, if any, backlash, and Costco should be able to follow.

. costco will increase prices subscriptions blame Sams Club Walmart

. Costco hike membership prices blame Walmarts Sams Club

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