Costco's New Member Test: Can Its Model Work for Budget Shoppers?

Costco's real business isn't the goods on its shelves. It's the $130 fee you pay to shop there. That annual price tag is the high-margin, high-retention cash cow that powers the entire model. Membership fees generate about 60%-70% of operating profit, making them the single most dependable profit lever in retail. The company's financial engine runs on loyalty, not just sales.

The numbers show how deeply this works. Executive members, who pay the $130 fee, now represent 74.3% of total sales. They are the heavy spenders, and their loyalty is rewarded with perks like exclusive early shopping hours and an annual cashback cap that was recently boosted to $1,250. This isn't just about a higher price; it's a strategic upgrade to keep the most valuable customers happy.

The fee itself is a carefully timed instrument. Costco raised the Executive membership from $120 to $130 in September 2024, a move that follows a historical pattern of increases every five and a half years. That timing suggests the company is managing the price hike to align with consumer patience, not just chasing revenue. In its first quarter of fiscal 2026, membership income surged 14% year-over-year to $1.33 billion, with the fee increase accounting for nearly half of that jump. Renewal rates remain sky-high at 92.2% in the U.S. and Canada, proving the model's staying power.

So the setup for 2026 is clear. The company is rolling out new perks to reinforce that value proposition and reaccelerate growth after a recent slowdown. The question for investors is whether these new benefits-like faster checkout systems and digital upgrades-justify the price point and the fee increase. The engine is proven, but can it keep spinning faster?

The 206 Perks: A Kick-the-Tires Analysis

Costco is rolling out a new set of benefits, and the company is betting they'll make the $130 fee feel like a better deal. The question is whether these perks actually improve the real-world shopping experience or just add another layer of complexity. Let's kick the tires.

First, the exclusive early shopping hours. Executive members now get 9-10 a.m. access on weekdays and Sundays. In practice, that means parking lots are clear and carts are plentiful. For a parent or someone with a tight schedule, that's a genuine time-saver. It's a simple, tangible benefit that directly addresses a common pain point: the chaos of a crowded store. This isn't just marketing fluff; it's a perk that improves utility.

Then there are the direct discounts. For a limited time, new Executive members get a free $40 shop card, and new Gold Star members get $20. That's a real upfront value boost, especially for someone trying the membership for the first time. It's a classic sales tactic, but it works because it lowers the perceived risk of the annual fee. The company is essentially giving you a reason to say yes.

The tech changes are more mixed. Faster checkout systems and password-less app sign-in sound good on paper. The promise of a 20% faster checkout is appealing, but the rollout is spotty. You might get it in one store and not another. That inconsistency can be more frustrating than helpful. Similarly, the password-less login is a convenience for some, but it's a minor tweak that doesn't fundamentally change the shopping experience. It feels more like a digital upgrade than a value driver.

The bottom line is that the best perks are the simple, physical ones. The early hours and the free shop cards are easy to understand and deliver clear, immediate value. The tech upgrades are a step in the right direction but are still in the early, uneven stages of adoption. For now, the real value boost comes from the tangible time saved and the instant discount, not from the digital interface.

The Real-World Test: Are Members Staying and Spending?

The perks are nice, but the real test is in the numbers. Do members still want in, and are they spending enough to justify the price? The hard metrics suggest the answer is a resounding yes.

First, loyalty remains rock solid. The company's renewal rate in the U.S. and Canada sits at 92.2%. That's an incredibly high bar, and it means the vast majority of members are choosing to pay the $130 fee again and again. Even a slight dip in that rate is being managed with targeted outreach, showing the company is watching this closely. This kind of retention is the bedrock of a membership model.

Second, the base is growing. The total paid membership count hit 81.4 million, a 5.2% year-over-year increase. That's expansion even as the company raises fees. It signals that the value proposition is still resonating with new shoppers, not just the loyalists. The growth is also quality-driven, with executive memberships jumping 9.1% to 39.7 million. These are the high-spending members who now drive 74.3% of total sales.

And the company is betting on that growth by building more stores. In early 2026, Costco opened a new warehouse in Roseville, CA, with more planned for the spring. This isn't just a token opening; it's a signal of continued physical expansion, a move that requires confidence in the model's ability to fill new locations with paying customers.

Put simply, the numbers pass the smell test. High renewal rates, a growing base, and aggressive store openings all point to a strategy that is working. The company is successfully converting its loyalty into both recurring revenue and physical growth. For now, the real-world test is clear: people are staying, and they are spending.

Catalysts and Risks: What to Watch in 2026

The thesis here is straightforward: Costco's model works because members feel it's worth the $130 fee. The near-term proof will come from a few clear, observable signs. Watch the renewal rate like a hawk. A sustained dip below the current 92.2% level in the U.S. and Canada would be the clearest signal that the new perks aren't enough to justify the price for a growing number of shoppers. That's the real-world utility test.

Then there's the physical experience. The new exclusive early shopping hours are a win for Executive members, but they could create a new headache. If those early slots draw so many shoppers that parking lots and aisles become more crowded during other times, it risks frustrating the broader membership base. The value of a quiet, spacious store is part of the appeal. Any shift that makes the standard shopping experience worse could undermine the loyalty the company is counting on.

The biggest external risk is simply that inflation keeps squeezing budgets. The company raised fees in September 2024, following a historical pattern of increases every five and a half years. That timing suggests management is trying to stay ahead of the curve. But if consumer pressure mounts, the $130 fee could start to feel like a harder sell, especially for middle-income shoppers who are the core of the Gold Star tier. The company's bet is that the bulk savings and treasure hunt experience still outweigh the cost, but that calculus is always vulnerable to a shift in disposable income.

A key development to monitor is the company's expansion into new markets. Costco opened a new warehouse in Roseville, CA in early 2026, with more planned. That's a vote of confidence in the model's ability to fill new locations. Yet the company is also building a whole new type of store in South Los Angeles, directly beneath an affordable housing complex. This project, expected to open in 2027, is a direct attempt to attract a different demographic. It's a smart move to grow the base, but it also tests the model's reach. Can the same value proposition work for a budget-conscious crowd in a dense urban area? The answer to that question will be a longer-term catalyst, but it shows the company is actively trying to keep the engine running.