Costco's Major Rival Is Raising Its Membership Prices for the First Time in a Decade
While inflation and rising prices have been detrimental to most businesses' bottom lines, warehouse clubs like Costco have actually benefited from the economic turbulence.
Shoppers flocked to wholesale clubs during the early days of the COVID-19 pandemic to stock up on food supplies and toiletries. More recently, consumers have sought relief from exorbitant inflation-driven prices by investing in annual memberships at warehouse clubs. The growing popularity prompted one of Costco's biggest warehouse rivals to announce a membership price increase for the first time in nearly a decade.
Walmart-owned Sam's Club will be raising membership fees next month. As of October 17, the price for an annual entry-level Sam's Club membership will increase from $45 to $50. The annual fee for the higher-tier "Plus membership" will also increase from $100 to $110.
This marks the first time ever that the Plus membership fee has increased, and the first fee hike in nine years for the entry-level membership.
For comparison's sake, despite these price increases, Sam's Club still isn't as expensive as Costco. A basic annual membership at Costco will set you back $60 and a "Gold-tier" membership costs $120.
Higher price, higher quality?
Sam's Club chief member and marketing officer Ciara Anfield told CNBC that the price increase isn't coming out of the blue. In recent years, Sam's Club has invested heavily in bringing higher quality products to its shelves and improving the entire shopping experience.
The retailer has added curb-side pick-up options at many locations as well as same-day home delivery. It even launched its own smartphone app that allows shoppers to ring up items as they browse the store.
Anfield used an analogy of investing in a home to increase its value. "There's an expectation that after you invest in this home, it will be worth more," she said. "We've made investments and we believe our proposition, our membership is now worth more."
This philosophy seems to be working for the company. While Sam's Club doesn't disclose its membership count, it did reveal that the number is at an all-time high, with membership income increasing by almost 9% in the most recent quarter.
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Sam's Cash for renewing members
Of course, Sam's Club is well aware that most members won't exactly be thrilled about the price hike. To ease the transition, Sam's Club will cover the cost of the increased fees for renewing members with Sam's Cash.
In a message sent Wednesday afternoon, Sam's Club CEO and president Kath McLay told members: "We are mindful of the financial pressure on wallets right now. So, this year's renewal is on us. We're giving back $5 in Sam's Cash to Club members and $10 in Sam's Cash to Plus members shortly after renewal."
