Costco quietly fixed a major member problem

Core Insights - Costco is encouraging members to upgrade to Executive Membership by offering incentives such as 2% cash back on purchases, which could enhance company profits given the slim gross margins of 11% in product sales [2][6] - The introduction of exclusive early shopping hours for Executive Members has positively impacted shopping patterns, reducing peak traffic times and improving the overall shopping experience for all members [4][10] Membership Structure - Executive Membership costs $130 annually, which includes a base membership fee of $65 plus a $65 upgrade [17] - Executive Members earn 2% cash back on most purchases, up to $1,250 per year, making the membership potentially worthwhile for those spending between $3,000 to $3,250 annually [17] Membership Growth - Membership income grew by 7.3% year over year, driven by an increase in membership base and upgrades to Executive Membership [6] - As of the end of Q1, Costco had 39.7 million paid Executive memberships, a 9.1% increase from the previous year, and a total of 81.4 million paid members, up 5.2% year over year [7] Operational Changes - The new early shopping hours for Executive Members have led to a more even distribution of shopper visits, improving customer experience without requiring additional staff [10][9] - The extended hours have also been beneficial for all members, as they help to spread out traffic and reduce congestion during peak shopping times [9][10] Expert Opinions - Industry experts view the early access hours as a strategic move to encourage upgrades to Executive Membership, although there are concerns about potential alienation of non-Executive Members [11][13] - The approach of rewarding top customers is seen as a way to reinforce loyalty and drive more sales [14]