Costco bargain hunters could soon be paying more for their deals and discounted items, a UBS report reveals. The large discount retailer is expected to increase its membership fees by 10% next year in efforts to combat reduced revenue growth. Michael Lasser, a New York-based UBS analyst predicts that we will be expecting a large surge of growth from the company directly related to these price hikes.
The main causing factor is that the international brand only increased its global turnover by 2% between this year ($89.44 billion) and last year ($87.67 billion). If you are unfamiliar with the company’s business model, they charge customers a membership fee that allows them access into their warehouse styled stores, which are several times the size of a regular supermarket. The company sells everything from fresh food to petrol, but how will the hike affect its current members?
If Costco increased its membership prices by 10% in Australia, then we could expect to see the Gold Star and Business membership rise to $66 and $60.50. The rest would be left to you, if you only shopped at the establishment on a rare occasion then the benefit of the membership would not be as good value. However, if you follow our Buckscoop blog then you will be aware of the numerous money saving tips you can use to get better value for money from businesses such as Costco. So, the small increase in membership fees is hardly likely to break the bank if you are savvy enough to sniff out bargains and deals within store to compensate.
Here are some helpful articles that we have posted regarding money saving when supermarket shopping and how to find deals and bargains amidst the large selection of offerings:
- Supermarket tricks used to make you spend more
- The shoppers guide: When to wholesale and when not to
- Perpetuating pricey petrol and the result of local competition
- Costco In-store shopping suggestions
The financial year of 2015 witnessed Costco generate $3.28 billion globally from membership fees, which represents roughly 70% of its operating income. During this financial period the company has to thank its marketing department because it increased its membership numbers to more than 81 million. The high operating profit figure is heaven for an accountant too, because it means that the company’s fees are almost pure profit.
Over the years Costco America has increased its fees three separate times, once in 2000, then 2006 and again in 2011. In Australia alone, the brand has over 150,000 members, but since the launch in 2009, the cost of being part of the club hasn’t changed, it’s still $60 for the Gold Star and $55 for the Business memberships.
Although there have been rumours about price hikes, no spokesman from the company has either confirmed or denied that it will happen. The only information they have admitted is that membership prices do generally increase every five to six years and the company does understand why analysts would assume that same pattern to occur.
Costco currently has eight stores across Australia, with plans to open three new locations during 2016, one in Marsden Park Sydney, Brisbane and Epping. Once these locations are open and operational, Patrick Noone, Costco’s Australian managing director says the company will endeavour to open in second tier locations e.g. Newcastle, Darwin and Wollongong.
The turbulent Australian supermarket industry helped Costco claw more market share last year with a massive increase from $878 million to $1.32 billion in turnover. This surge in sales helped the company claim 1.5% of $90 billion grocery industry in Australia and with more pressure from discount brands on the large supermarkets Coles and Woolworths, we can expect to see more deals and bargains being used in the supermarket battle to win over customers wallets.