Retail is one of the largest industries on the planet, but it's also highly competitive. According to Mordor Intelligence, the global retail market is forecast to expand to $27.3 trillion this year, with an annualized growth rate topping 6% through 2030.
Despite the razor-thin margins often associated with retail sales, the rewards can be lucrative for the businesses that stand out, such as Amazon, Walmart, and Costco Wholesale (COST +1.85%).
But what makes these three retail leaders successful is their dynamic operating approach. They're constantly innovating in their own unique ways and finding new pathways to boost sales and keep customers loyal to their ecosystem of products and services. This is especially true for warehouse club Costco, which has made three sizable changes over the last year, including a brand-new perk that's dividing many of its 79.6 million paying members.
Image source: Costco.
1. The first annual membership fee increases in seven years
No change has been more pronounced over the last year than Costco's decision to increase its annual membership fees.
Beginning on Sept. 1, 2024, Gold Star and Business members saw their annual membership fee rise from $60 to $65, while Executive cardholders had their yearly fee jump from $120 to $130. It's also worth noting that Executive cardholders receive 2% back on most qualifying purchases, and the annual amount back they're eligible to receive increased from $1,000 to $1,250 on Sept. 1, 2024.
This was a seemingly long overdue fee increase, with the last occurring in 2017.
While this is a relatively small price to pay for consumers to gain access to Costco's warehouses, it's a big deal for the company and Costco stock shareholders. It purposely purchases products in bulk to lower its per-unit cost and undercut mom-and-pop shops and national grocery chains on price. To ensure that it can keep its prices well below the competition on the basic need goods that draw consumers into its stores, it leans on membership fees to do the heavy lifting.
Costco's membership fees flow almost directly to its bottom line. They provide a healthy margin buffer that allows the company to offer amazing grocery deals and to buy unique items that you'll only find in its warehouses (gold bars and one-off, high-end jewelry and timepieces).
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2. Required members to scan their card or QR code at store entrance
The second meaningful adjustment made to Costco's rules and policies over the last year was clamping down on non-members entering its stores.
In August 2024, Costco Wholesale announced plans to begin using scanning devices at the entrance of all of its locations, which would be implemented in the "coming months." Members would be required to scan their membership card or a digital QR code upon entry, and may have to show valid identification if their membership card doesn't have a photo on it.
This change was made to ensure that its aforementioned 79.6 million paying members, as of the end of the fiscal third quarter (May 11, 2025), are the one's receiving all the perks. Removing non-members from the equation helps Costco maintain its razor-thin margins on popular items, and also plays a critical role in keeping food court prices down.
In addition to having members scan their membership card upon entry, Costco removed the ability for non-members to purchase food court items, which includes the famous $1.50 hot dog combo.
Image source: Getty Images.
3. Offered a new shopping perk to its highest tier of cardholders
But the change that's left its domestic membership base divided went into effect earlier this month.
Initially announced in June but not fully implemented until Sept. 2, Executive cardholders have exclusive early morning shopping access to Costco's U.S. warehouses seven days a week. During weekdays and Sundays from 9 a.m. to 10 a.m., only Executive members are allowed to shop in its stores. On Saturdays, this exclusive shopping window is narrowed to 30 minutes, 9 a.m. to 9:30 a.m.
As you can imagine, this probably doesn't sit well with U.S. Gold Star and Business cardholders -- but it serves a purpose.
According to the company, 37.6 million (47%) of its 79.6 million paying members are Executive tier. However, these 47% accounted for 73.1% of net sales during the fiscal third quarter. Pleasing this group of cardholders and ensuring their annual renewal rate is above 90% is paramount to Costco's long-term success. For what it's worth, the cumulative renewal rate for members across all tiers was a solid 92.7% in the U.S. and Canada during the fiscal third quarter.
Furthermore, dangling the proverbial carrot of exclusive shopping hours, following a $250 increase to annual Executive membership rewards last year, provides a catalyst for Gold Star and Business members to upgrade. The more cardholders are spending on their annual membership, the more likely they are to make Costco their first shopping choice. After all, they're going to want to get as much out of their membership fee as possible.
While this may not be the last we hear about exclusive shopping hours for Costco's highest tier of cardholders, it's an undeniably a smart move from a proven growth stock in the retail space.
