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Costco raises, will Sam’s Club call?

Costco is increasing the price of its membership fees, giving Sam’s Club the green light to follow suit, although such a move seems unlikely at this time. Why? Because Sam’s Club is enjoying favorable sales momentum and upgrade activity that might be jeopardized if members were asked to pay more. In fact, by leaving its rates unchanged during the next 12 months as Costco members go through their renewal cycle, Sam’s has a window of opportunity to position itself as the more compelling value in the club channel and gain share from disaffected Costco members who may be annoyed by yet another company dinging them with increased fees.

Now the likelihood of that happening is debatable since Costco enjoys an enviable level of member loyalty among its affluent shopper base so many of the company’s members may simply shrug it off and pay the extra $5 or $10. The company’s fourth quarter ended recently and renewal rates were steady at 89%, and membership upgrades were said to be accelerating.

Costco’s new rates take effect Nov. 1, when the fee for Goldstar members, or Advantage members as they are known at Sam’s, increase to $55 from $50. The Executive membership, or Plus membership in Sam’s case, will increase to $110 from $100. The company said the fee increase will impact more than 22 million members, roughly half of which are Executive members. The Executive member rate increase is the first since the program was launched in 1997, while the last time the Goldstar fee was increased was 2006 when it was raised to $50 from $45.

“We feel that the enhanced value of the Costco membership over the past five to 10 years far exceeds the modest $5 and $10 increase in the annual membership fee levels, and it will continue to allow us to bring our members even greater value on everything we offer,” Costco CFO Richard Galanti said during a conference call to discuss fourth quarter results.

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