![](\"https:\/\/www.thestreet.com\/.image\/c_fit%2Ch_800%2Cw_1200\/NDA6MDAwMDAwMDAyOTA1MTA1\/costco-members-lead.jpg\")
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Memberships drive Costco’s business.<\/p>\n
\u201cThe most important item we sell is the membership card,\u201d Costco CEO Ron Vachris told Fortune.<\/p>\n
Costco also makes much of its profit from selling memberships, since it sells most of its merchandise at very low margins.<\/p>\n
Members \u201ckeep coming back because they know Costco will pass savings on to them,\u201d creating a model where membership income helps fund low prices and those low prices drive renewals, according to The Motley Fool.<\/p>\n
“Shoppers pay an annual fee to join, and in fiscal 2025 (year ended Aug. 31, 2025), these fees generated $5.3 billion in revenue. And since the costs of running this membership are minimal, nearly all of that goes straight to the bottom line,” The Motley Fool’s Lawrence Nga wrote.<\/p>\n
The warehouse club has seen its membership revenue rise, partially because of its Sept. 1 membership fee hike, and partly by adding new members.<\/p>\n
Its renewal rate, however, fell, and that’s tied to a feature many members don’t know about \u2014 “set it and forget it” auto-renewal.<\/p>\n
A quick look at Costco’s membership numbers<\/p>\n
“We reported membership fee income of $1.355 billion, an increase of $162 million or 13.6% year-over-year,” CFO Gary Millerchip said during the warehouse club’s second-quarter earnings call. “The September 2024 U.S. and Canada membership fee increase accounted for about one-third of our membership income growth.”<\/p>\n
Numbers would have been strong even without the increase from $60 to $65 for Gold memberships and $120 to $130 for Executive memberships.<\/p>\n
“Excluding the membership fee increase and FX, membership income grew 7.5% year-over-year. This was driven by continued growth in our membership base and upgrades to executive memberships,” he added.<\/p>\n
At Q2 end, Costco had 40.4 million paid executive memberships, up 9.5% versus last year.The chain ended the quarter with 82.1 million total paid members, up 4.8% versus last year, and 147.2 million cardholders, up 4.7% year over year.In terms of renewal rates, at Q2 end, Costco’s U.S. and Canada renewal rate was 92.1%, down 0.1% from last quarter, and the worldwide rate came in at 89.7%, unchanged from last quarter.<\/p>\n
“The slight decline in the U.S. and Canada renewal rate was due to the factors we have discussed in prior quarters and reflects new online members growing as a percentage of our total base and renewing at a slightly lower rate than warehouse sign-ups,” he shared.<\/p>\n
That’s partially an auto-renewal problem because the chain’s growing number of members who join online don’t opt into auto-renewal at the same rate as members who sign up in a warehouse. This has explained the chain’s slightly lower renewal rates.<\/p>\n
Costco offers auto-renewal opt-in<\/p>\n
When you join Costco in a warehouse, you have the option of setting it to auto-renew. That’s not part of the online membership process, and people who join that way have to manually change the settings on their account.<\/p>\n
It’s not at all complicated, but online members enable auto-renew at lower numbers than members who join in a Costco store. That’s something the company has been working on.<\/p>\n
“The auto renewal is something we’ve been focused on for some time. We believe as more members have grown over time, there’s a real benefit in helping the member from a convenience point of view, having auto renew. And of course, it helps us with membership renewal rates as well,” Millerchip added.<\/p>\n
How to set your membership to auto-renewGo to Costco.com and select Sign In\/Register in the upper-right corner of the page (just make sure your membership is verified\u00a0beforehand).
\nProceed to the next step if you are signed in and see “Account” to the left of Orders & Returns.
\nUnder “Account,” choose Renew Membership.Add, remove, or select a Visa or Mastercard card for Auto Renew.For the automatic renewal of your membership, check the box to confirm your consent of the following:
\nYour Costco membership fee will renew automatically and be charged annually on the first day of your renewal month until you choose a different form of payment or cancel Auto Renewal from your Costco membership.\u00a0<\/p>\n
Future membership fees will be charged based on your membership level. <\/p>\n
Membership fees are subject to change. If you wish to cancel Auto Renewal or pay your Costco membership fee using a different method of payment, you can visit a Costco membership counter or access your membership account on Costco.com. You may also chat with Costco Member Services or call 1-800-774-2678 at least 72 hours prior to the first day of your renewal month.<\/p>\n
Costco has seen a slight drop in its membership renewal rates. <\/p>\n
Shutterstock<\/p>\n
Costco’s membership numbers are strong<\/p>\n
While people may consider whether to keep Netflix, or if they really need to renew their Disney World annual pass, most Costco customers know whether the membership is a value. If you visit the chain regularly, nearly anyone would save enough money to make auto-renewal a good idea.<\/p>\n
“Costco\u2019s 2.96% profit margin on merchandise sales looks anemic until you realize membership income grew 14% year-over-year. That high-margin recurring revenue subsidizes razor-thin retail pricing, which keeps members renewing. It\u2019s a flywheel, not a treadmill,” 24\/7WallSt.com wrote.<\/p>\n
The warehouse club’s business model is well-positioned for a struggling economy, even with the fee to access its stores.<\/p>\n
Bernstein analysts named Amazon, Walmart, and Costco as \u201cbest positioned to ride a macro storm\u201d due in part to the revenue they generate from \u201cmembership lock-in,\u201d Investopedia reported.<\/p>\n
“Their focus on value and consumer staples could also help them take market share if macro conditions worsen,” Bernstein added.<\/p>\n
Costco’s pay-upfront-to-join model actually drives loyalty.<\/p>\n
“Unlike most brands that reward repeat purchases with points or discounts, Costco takes a counterintuitive approach: It asks customers to pay upfront for the privilege of shopping. And rather than weakening commitment, this model appears to strengthen it year after year,” according to BLOY Loyalty.<\/p>\n
Related: Costco makes key gas move as pump prices rise<\/p>\n
#Costco #members #overlooking #valuable #feature<\/p>\n","protected":false},"excerpt":{"rendered":"
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