Latest news with #ExecutiveMembers
Forbes
2 days ago
- Business
- Forbes
Costco And RH Add Extra Benefits For Their Most Valuable Membership Customers
Edmonton, Alberta, Canada. May 24, 2025. A clean and organized Costco Membership desk, showcasing ... More various membership tiers and the co-branded credit card, ready for new sign-ups. Costco and RH rely on higher-income customers to maintain robust sales. When both brands, in lockstep, boost benefits to their most valuable customers, it raises a key question: whether these enhanced benefits signal a shift in consumer behavior or a response to slowing demand in the face of economic headwinds. Both brands depend on the patronage of affluent consumers. Costco has the strongest appeal to customers at the $125,000 income level and higher, while nearly half of RH store visitors have incomes of $150,000 or more. And both rely on the outsized spending potential of affluents. Costco's highest-tier Executive members, who pay double the base amount for their membership, accounted for 73% of its $250 billion global net sales in 2024. RH derived a remarkable 98% of its $3 billion core RH revenues from its members – Waterworks added another $193 million to RH's topline last year. For Costco, membership fees largely go straight to the bottom line, so offering Gold Star and Business members an extra incentive to upgrade to the Executive level could be a boon to company profits, especially since gross margins are a slim 11% in product sales. For RH, membership fees help offset the generous discounts members receive, which just increased from a 25% to 30%. This may help RH attract new members, as memberships declined 6% this year, from 281,000 in 2023 to 265,000 in 2024. Memberships are an important driver for customer loyalty, more so for Costco with its emphasis on low-cost everyday consumables, but memberships certainly helps RH too. Why should its card-carrying members shop anywhere else when they get an extra 30% off just by walking into the store? Yet, Costco sells a significant amount of discretionary items, including furniture, so both are at risk should high-value customers choose to delay such purchases. Improving member benefits is a way to keep both retailers' most valuable customers engaged and give them a greater return on their membership investment. Later this month, Costco plans to open its doors one-hour early to Executive members, giving them more exclusive, less crowded and more time-efficient shopping experiences. In addition, last September, Costco increased the maximum annual 2% reward for executive members from $1,000 to $1,250. This higher payback came along with a 5% increase in all membership fees. The basic membership increased from $60 to $65 and executive membership went from $120 to $130. Overall, 35.4 million – 46% of Costco's 76.2 million paid members – held an executive-level membership, up from 45% in 2023 and 44% in 2022. Yet, in 2024, the $4.8 billion in revenues generated from membership fees rose only 5%, compared with 8% in 2023 and 9% in 2022. At the Sept. 1 close of fiscal 2024, it had yet to benefit from the fee increase. However, through in third quarter 2025 ended May 11, revenue growth from membership fees was back on par with 2022, up 9% to $3.6 billion, with paid membership up 7% to 79.6 million and executive memberships reaching 37.6 million. Membership renewals continue to top 90%. While opening Costco's doors an hour earlier is a minor convenience, combining it with raising the bar on executive members' cash-back rebates could be enough to incentivize more customers to buy-in at the executive level, potentially doubling the membership fees pocketed for each new executive member. And most of that gain will go to Costco's bottom line. In a nod to increasing value for members' $200 annual fee, RH has just increased its member discount from 25% to 30% on all regularly priced merchandise, except outdoor furniture where they earn a 35% discount. Members also continue to receive an extra 20% off sales items and complementary interior design services. The company stated, 'We are living in a time of more: more tariffs, politics, uncertainty. We voted to create more value.' Unlike Costco, RH doesn't report membership revenue but working the numbers, it amounts to just over $50 million annually, which helps offset the discounts. In a research note, Jefferies reports that recent price increases might 'neutralize margin headwind' from the greater member discount, though that has yet to show up on the balance sheet. It also might mean that RH has increased prices too much. 'We believe it's a move to avoid sales declines,' Jefferies said, adding that 'the pace of RH's ascent up the 'luxury mountain' appears to be slowing.' RH will report first-quarter 2025 earnings on June 12 after the market closes – I'll be listening – but this proactive move might be a way to energize investors ahead of the announcement. Jefferies expects revenues to reach $816 million, up 12% year-over-year, following a 2% drop in first quarter revenues last year. Two new gallery openings at the end of 2024 give RH momentum – it ended fiscal 2025 with 69 RH retail locations, including five in Europe – as does increased promotional activity, including the new Outdoor Sourcebook and an outdoor gallery in Greenwich, CT. However, the increased 35% discount on outdoor furniture raises questions about whether the outdoor expansion is living up to expectations. Despite operating in distinct spheres, Costco and RH both cater to affluent consumers who prioritize value in their memberships. Offering top-tier customers greater returns on their membership is a strategic move that will serve both retailers well to reinforce customer loyalty and grow their membership base.
Daily Mail
2 days ago
- Business
- Daily Mail
Costco rolls out new perk to help shoppers beat crowds
By Costco is introducing a new perk that will allow certain members to have their own private shopping hours. Executive tier members will be able to shop for an hour earlier than regular Gold Star members from June 30. The big box retailer will now allow its top tier members, who pay $130 a year, to shop from 9am to 10am on weekdays and Sundays, and 9am to 9:30am on Saturdays. 'Our Executive Members are our most loyal members, and we want to reward them for their commitment to Costco,' the company told employees in an email seen by Business Insider. The retail giant said that the top tier members would also start receiving a $10 monthly credit for Instacart orders, as well as $150 worth of other benefits and savings on Costco services. Around half of Costco shoppers have Executive level memberships, but they account for 73 percent of sales, according to the company. The top level also offers a 2 percent rebate on all Costco purchases made that year up to a total of $750. Costco hopes the new shopping hours will reduce traffic in car parks and lines at checkouts, which is a key customer complaint. However, it is also a move that could boost membership fee revenue, a key driver of Costco's bottom line. Last year Costco brought in more than $4 billion a year from membership fees alone, after upping its rates in September. It comes after Costco also expanded its gas station hours and added more pumps. The retailer's gas stations are now open from 6am until 10pm on weekdays . On Saturday and Sunday, Costco gas stations now open at 6am and close at 8:30pm and 7:30pm, respectively. The wholesale giant originally closed it 60 gas stations at 9pm but decided to extend its hours further, much to the delight of its loyal customers. Costco has built a reputation for consistently offering gas prices below market averages, leading to the familiar sight of vehicle queues at Costco pumps across the country. Fuel sales made up around 12 percent of the Costco's total sales last year, and its cheap gas and accessible stations are a key incentive for memberships. Costco hiked its membership rates back in September last year, taking its standard Gold level membership from $60 to $65 and its Executive level by $10 to $130 a year.
