Costco's Emerging Risks: Assessing the Long-Term Impact of Eroding Membership Growth and Rising Competition

Costco's membership model has long been a cornerstone of its success, generating steady revenue while fostering customer loyalty through bulk discounts and exclusive benefits. However, emerging risks-namely, the potential erosion of membership growth and intensifying competition-pose critical questions for investors. This analysis evaluates whether Costco's growth trajectory remains sustainable and how its strategic responses might mitigate or exacerbate these challenges.

Membership Growth: Steady but Slowing?

Costco's membership fees have grown consistently, reaching $4.828 billion in 2024-a 5.41% increase from 2023-and projected to hit $5.17 billion in 2025, according to a Capital One Shopping report. While this represents robust growth, historical context reveals a moderation in momentum. From 2016 to 2024, membership fees surged 85% from $2.6 billion to $4.8 billion, averaging roughly 7% annual growth, as shown by Stock Dividend Screener. By contrast, the 2023–2025 period shows a decline to 5.41%, suggesting a potential plateau.

The 2024 membership fee hike in the U.S. and Canada (from $60 to $65 for Gold Star and $120 to $130 for Executive) contributed to revenue gains but accounted for less than half of the growth, according to a Yahoo Finance article. New sign-ups and executive upgrades-now 47.7% of paid members-were the primary drivers, per the Capital One Shopping report. However, renewal rates have dipped slightly, with online sign-ups renewing at lower rates than in-store acquisitions, according to the Yahoo Finance article. This trend, coupled with a global renewal rate of 90.2% in Q3 2025 (down from 92.7% in U.S. and Canada), signals early signs of vulnerability, per a Subscription Insider piece.

Competitive Pressures: A Crowded Arena

Costco's dominance in the warehouse club sector-holding 77.7% of the U.S. market in Q1 2025-was noted in a TheStreet article, but that position faces mounting challenges. Sam's Club, Walmart's subsidiary, has aggressively undercut Costco's membership fees, offering a $30 annual rate for new members through June 2025 and introducing a $8.98 Members Mark pizza (vs. Costco's $9.99) with free delivery for Plus members, targeting price-sensitive shoppers. These tactics, combined with Sam's Club's 2025 goal to double its membership base over 8–10 years, highlight a strategic shift toward digital engagement and affordability.

Amazon, meanwhile, leverages its Prime membership to compete indirectly. With 250 million global Prime members as of 2025, Amazon's ecosystem of fast shipping, streaming services, and e-commerce convenience creates a different value proposition, as reported in a Forbes article. While Costco's physical stores and bulk pricing remain unmatched, Amazon's frictionless digital experience appeals to a growing segment of tech-savvy consumers. Walmart's sheer scale-$768 billion in 2024 retail sales-also enables it to undercut prices on everyday items, further fragmenting the market, according to a Bankshot Strategy analysis.

Strategic Responses: Can Costco Adapt?

Costco's leadership has responded with innovations aimed at retaining and expanding its base. Auto-renewal features, extended warehouse hours, and a $10 monthly Instacart credit for Executive members were among the measures reported in the Yahoo Finance article and are designed to enhance value perception. The company also invested in digital tools, such as mobile app enhancements and online grocery services, to cater to younger demographics. Executive memberships, now accounting for 74.2% of global sales, underscore the importance of tiered pricing in maximizing revenue per member, per the Capital One Shopping report.

However, these strategies come with risks. Relying heavily on Executive memberships could alienate price-sensitive customers, while digital initiatives require significant capital investment. Moreover, Costco's high renewal rates (92.7% in U.S. and Canada, per the Subscription Insider piece) mask underlying fragility: a 1% drop in retention could translate to millions in lost revenue.

Risk Assessment for Investors

For investors, the key question is whether Costco's membership growth is sustainable. While the company's model remains resilient-bolstered by high renewal rates and brand loyalty-the slowing growth rate and competitive pressures warrant caution. The 2024 fee hike, though a short-term revenue boost, may not offset long-term erosion if rivals continue to innovate. Additionally, Costco's reliance on membership fees (1.9% of total revenue in 2024, per the Capital One Shopping report) means even minor declines could impact profitability.

Yet Costco's strengths-its low-cost structure, customer-centric approach, and ability to absorb supplier costs-provide a buffer. The company's focus on value over margins, exemplified by its 14% membership fee increase in Q4 2025, as reported in the Yahoo Finance article, demonstrates a willingness to adapt. For now, Costco's moat remains strong, but investors should monitor renewal trends and competitor actions closely.

Conclusion

Costco's membership growth, while still positive, shows signs of moderation. The company's ability to navigate rising competition and evolving consumer preferences will determine its long-term success. Strategic investments in digital engagement and tiered memberships offer a path forward, but risks persist. Investors should balance confidence in Costco's enduring model with vigilance regarding market dynamics.