There’s a reason Costco has enjoyed so much success in recent years, while competing retailers have floundered.
Costco doesn’t have to worry about profit margins the same way other retailers do because it has a not-so-secret weapon in its back pocket — membership fee revenue.
During Costco’s last fiscal quarter, membership fee income increased 14% on a year-over-year basis. And much of that came from Executive memberships.
Costco members get a choice of membership tier when they sign up. A basic Gold Star membership costs $65 per year, while an Executive membership costs $130.
But Executive members get a host of added perks.
Costco Executive member benefits:
- 2% cash back on most Costco purchases
- Early shopping hours during the week and on weekdays
- A $10 monthly credit on same-day grocery orders of $150 or more
Costco is invested in adding extra value for Executive members because it wants more people to join at or upgrade to that tier.
But the company may be taking things too far with a recent move.
Image source: Brooks Kraft LLC/Corbis via Getty Images
Costco goes all in on Executive membership push
The more revenue Costco can enjoy in the form of membership fees, the better. So it’s easy to see why Costco would love it if more members were to upgrade to the Executive tier.
To this end, Costco has been encouraging employees to approach shoppers in the checkout area and ask if they’re interested in updating their memberships.
But those employees often do so in a pushy manner. And a lot of Gold Star members are getting tired of being harassed.
Related: Costco makes major food court change
As Bob from Central New Jersey commented, “The last few times I’ve gone to check out, I’ve gotten the third degree about my membership. It’s getting really old.”
“I don’t shop here a lot,” he continued. “The membership I have makes sense for me.”
Other members have expressed frustration over being pushed to upgrade.
“I’ve had a cashier call someone over to give me this pitch too,” one Reddit user commented. “What annoyed me was I had to tell this woman ‘no’ three times before she would leave.”
Costco employees are getting annoyed, too
Not only are Gold Star members at Costco getting increasingly aggravated at having to fend off pushy upgrade requests, but some store employees are upset that they’ve been put in the position of having to get in customers’ faces to promote Executive memberships.
“We are sick and tired of harassing everyone to upgrade,” one Costco employee vented on Reddit. “We even have one employee who apologizes before starting the speech because we know the pressure this puts on you.”
Another Reddit user was kind enough to respond, “I never blame employees for that. People with a brain know that the criminals in suits at Corporate are the masterminds behind the harassment.”
Related: Aldi adds convenient new perk many customers can’t afford
For a company that’s built a reputation on outstanding customer service, Costco is taking a big risk with its aggressive approach to pushing Executive membership upgrades. And in its quest for more membership fee revenue, the company risks alienating customers and driving them away.
Costco has already done its part to sweeten the deal for Executive members with recently added perks. If it wants to see more members join at that tier, a better approach may be to get creative and think up even more new incentives – not harass existing customers who are trying to pay for their purchases and get out the door.
Maurie Backman owns shares of Costco.
Related: Sam’s Club makes major checkout change Costco rejected
