Costco announced on July 10 that membership prices are increasing by $5 to $65 for the basic Gold Star level in the U.S. and Canada, while the executive membership plan, which offers cash back, will go to $130 from $120 as of September 1, 2024.
The graph below (courtesy of Reddit user /u/carbon_finance) shows the evolution of Costco's Gold Star Annual Membership Fee from 1983 to 2024. Here are some interesting analytical points:
- Long-term growth: The fee has increased from $25 in 1983 to $65 in 2024, a 160% increase over 41 years.
- Infrequent changes: Costco doesn't raise fees often. There were long periods of stability, including 7 years without a change from 2017 to 2023.
- Steady increments: When increases occur, they're usually in $5 increments.
- Recent acceleration: The pace of increases has picked up since 2000, with more frequent and larger jumps.
- Still below the inflation rate which would have been roughly $80 in 2024.
- Business scale: As of 2023, Costco had 58.8 million Gold Star members and 878 total warehouses.
- Revenue impact: The Last Twelve Months (LTM) membership fee revenue was $4.83 billion.
- Consistent growth: The 10-year Compound Annual Growth Rate (CAGR) for membership fee revenue is 7.33%.
In summary, this graph illustrates Costco's careful approach to raising membership fees over four decades. Despite infrequent increases, the company has managed to grow its membership base significantly, resulting in substantial revenue from fees alone. The strategy of maintaining long periods of stable pricing, punctuated by modest increases, seems to have been effective in balancing customer retention with revenue growth.