Costco to increase membership fees this fall

Costco membership fees increasing Costco is increasing its membership fees this fall. CTV's Tyler Fleming has reaction from shoppers.

Costco will raise its annual membership prices in the U.S. and Canada starting Sep. 1.

The increase will affect individual, business, and executive memberships, impacting around 52 million cardholders.

For individual and business memberships, the fee will rise by $5 to $65 per year, while executive memberships will now cost $130, up from $120.

Costco shopper, Ali Hanan, says she prefers the warehouse for its variety of essentials and deals and is okay with the bump in membership cost.

"I can cope with it, I get the deals and also I can easily make returns," says Hanan. "I feel good with it."

Executive members will also see a bump in the maximum amount of rewards that can be claimed, but for some shoppers, it may not be worth the money.

"You know businesses make their decisions, there's no being okay with it or not okay, there's the price and the choice," said Costco shopper, Dave Denike, an executive member. "I don't know if I'll renew, I have to look at the numbers."

This is the first time in seven years that Costco has raised its fees. In March, the company began using digital card scanners to crack down on non-members attempting to shop.

Retail analyst, Bruce Winder, says heightened inflation, along with rising wages, and increased costs of energy and raw materials over the last five years likely played a role in the company's decision.

"Costco membership fees represent about 65 per cent roughly of their profit so this is a really big way they make their profit," said Winder. "Costco operates on roughly 15 per cent gross margin, which means they only mark up products by about 15 per cent from what manufactures sell to them ... Membership fees are absolutely how they keep prices lower while still able to supplement their profits. A normal retailer, who does not have a membership fees is relying 100 per cent on the gross margin off the products they sell in the store. Costco is different."

Last year, Costco had nearly 130 million members. Over time, as more members renew, the fee increase could generate more than a billion dollars in revenue.

But Gerald Keogh, a frequent Costco shopper, is confident he shops enough to offset the added $10 cost of his executive membership.

"I always get back more than the membership cost, so it’s not a big deal," Keogh said.

Despite the membership fee increase, Costco’s iconic $1.50 hot dog and pop combo will remain the same, at least for now.