Costco is known for a lot of things – giant-sized shopping carts that make you break out in a sweat when they’re full, massive warehouse club stores, and an extremely generous return policy that lets you bring back almost any item at any time for any reason.
But perhaps the thing Costco is most known for is its almost unbelievably low prices.
Costco is able to offer those outstanding prices for a few reasons:
- Its ability to negotiate great deals with suppliers
- Its ability to produce affordable Kirkland Signature versions of products made by national brands
- Its ability to offset inventory costs with membership fee revenue
To the latter point, Costco relies heavily on its Executive members in particular.
An Executive membership at Costco costs $130 per year, compared to $65 for a basic Gold Star membership.
In exchange, Executive members get to enjoy perks that include:
- 2% cash back on most Costco purchases
- Early shopping hours
- Added discounts on insurance and other services purchased through Costco
Meanwhile, Costco recently added another perk for Executive members that could result in a world of savings. So if you’ve been on the fence about upgrading your membership, you may want to do so now.
Executive members can now enjoy big savings on delivery
Part of the fun of shopping at Costco is wandering around those giant stores, checking out new inventory, and getting to enjoy free food and drink samples.
But if you’re someone who doesn’t like crowds, has a busy schedule, or doesn’t have a warehouse club store all that close by, you may find it easier and more convenient to order your groceries from Costco for same-day delivery. This allows you to load up on perishables without having to leave the house.
Related: Costco shares mixed news on holiday inventory
Costco recently added a new benefit that gives its Executive members one $10 credit per month on orders of $150 or more on either Instacart or Costco Same-Day Delivery.
To use your credit, just place an order through either platform, and it’ll get applied automatically.
The $10 credit expires at the end of each month and won’t roll over to the following month. But fear not, because that credit renews automatically on the first of each month.
A strategic move on Costco’s part
Even though a little less than half of Costco members join at the Executive level, Executive members make up 73% of sales, says Yahoo Finance. So it pays for Costco to do what it can to persuade more people to upgrade to the Executive tier.
“Executive Members drive Costco’s business. They are actually way more likely to be regular shoppers than Gold Star members, and it’s very important for the warehouse club to keep them happy,” says retail expert and TheStreet Co-Editor-in-Chief Daniel Kline.
Related: Costco quietly adds extended hours for members
During its most recent earnings call, Costco pointed out that extending warehouse club hours for Executive members resulted in an uptick in sales. If Costco continues to add incentives like the $10 credit on same-day delivery, more people may be inclined to pay the $130 for the higher-tier membership.
Of course, there’s an easy way to see if an Executive membership makes sense for you. If you believe you’ll spend more than $3,250 a year at Costco, then it pays to upgrade, because 2% back on that sum is $65 – the exact cost of the upgrade.
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Every extra dollar you spend at Costco beyond that point puts more cash in your pocket than what the upgrade costs.
Now, if you’re someone who tends to order same-day delivery from Costco, you’ll also need to factor in the new $10 credit. But chances are, if you go to the store on a somewhat regular basis and/or make a large one-off purchase or two per year, upgrading to the Executive membership will probably work out in your favor.
Maurie Backman owns shares of Costco.
Related: Much-disliked Costco change brings members hidden benefit
