Costco will hike membership fees in Canada and U.S. this June
Costco will charge shoppers in Canada and the U.S. an extra $5 or $10 for an annual membership after the big box retailer posted financial results that disappointed Wall Street.
The chain, which has 94 locations across Canada, announced late Thursday that starting in June 1, a regular "gold star" membership will now cost an extra $5 in the local currency to $60 in the U.S. and Canada. An executive membership, which comes with discounts and benefits, will be bumped up $10 to $120 a year.
The chain last hiked its membership fees in 2011.
Costco had almost 87 million members at the end of its last fiscal year, including about 10 million in Canada. Worldwide, they collectively paid more than $2.6 billion US for the right to shop at the stores — more than the company made in profits last year.
The brand is especially strong in Canada, with same-store sales increasing 8 per cent last year being a major reason why the chain plans to expand to 7 more stores this year, saysSylvain Charlebois, a professor of food distribution at Dalhousie University in Halifax.
"Given its solid success over the last few years in Canada, higher membership fees won't change much of anything," he said.
The second largest bricks-and-mortar retailer in the world behind Walmart, Costco has grown steadily by luring people in the door with rock bottom prices for necessities but then getting them to impulse buy, Bloomberg analyst Jennifer Bartaschus said.
"Treasure-hunt finds, such as a designer brand or one-of-a-kind item the warehouse usually doesn't stock, encourage impulse buys and draw customers to the store more often," she said in a note.
Despite the fee hike, most members will likely stay with the chain, as Costco enjoys a 90 per cent renewal rate every year with members — especially executive members who pay more for access but also buy more.
If there's one market segment where Costco is vulnerable, Bartaschus said, it's with millennials.
"Rival retailers, such as Walmart, offer bulk sizes and online shopping, as well as grocery click-and-collect, catering to millennials seeking convenience," she said. "Costco's strategy has focused on bulk sales and in-store shopping."
The company also made headlines in recent years in a high-profile dispute with credit card companies over fees.
American Express used to be the only credit card that Costco would accept, but since 2015, those cards are no longer accepted, while MasterCard is now accepted in store, and Visa cards can now be used for online purchases.
- An earlier version of this story said Costco accepts Visa cards in Canada. In fact, MasterCard is the only credit card accepted in Canadian stores, but Visa can be used online.Mar 03, 2017 11:45 AM ET