Costco Reveals the Surprising Truth About Its 'Most Important Item'
If you tried to picture the most important product that Costco sells, fan-favorite items like the $4.99 rotisserie chicken, $1.50 food court hot dog combos, or the beloved bakery treats would probably be among the first to come to mind. However, Costco's top executive just revealed that their most essential item isn't something that you can add to your shopping cart or grab from the food court.
In a May interview with Fortune, new Costco CEO Ron Vachris divulged that the most important product is the warehouse membership itself rather than its products.
"The most important item we sell is the membership card," Vachris told the publication.
While this fact could seem surprising at first, it makes plenty of sense when you consider just how lucrative selling memberships has become for Costco.
Costco ended its latest quarter with 74.5 million paid household members, a 7.8% increase from the prior year. Those millions of members all need to pay dues each year depending on which membership tier they opt for. The basic Gold Star Membership costs shoppers $60 annually, while the higher tier Executive Membership costs shoppers $120 annually.
Costco strives to make paying those fees worthwhile by offering plenty of tantalizing membership perks, such as affordable bulk groceries, a low-priced food court menu, cheap gas, free samples, tire services, gift card deals, prescription markdowns, and access to its popular Kirkland Signature house brand.
Those who shell out for the pricier Executive Membership can also receive 2% cash back on qualifying purchases. This reward add up fast for customers who shop at Costco often. According to the company's website, you can recoup $60 annually by spending $250 per month at Costco.
"Everything we do supports that transaction," Vachris told Fortune of its membership card sales.
More than four decades after the very first Costco warehouse opened its doors in 1983, the retailer's customer base is still growing at a rapid pace. Per Fortune, Costco's membership has skyrocketed by a whopping 50% just since 2016.
Membership sales could become even more fruitful for Costco if it follows through on its long-anticipated membership fee hike. The company has historically raised its fees about every five years and seven months and has been hinting that an increase is forthcoming for over a year. However, Costco has yet to decide on when to roll out the fee hike.
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