Although the past few years have been tough on retailers, Costco has managed to thrive. Not only has the warehouse club giant expanded its footprint to 914 stores worldwide, it also enjoyed a fantastic final quarter of 2025.
On a year-over-year basis:
- Net sales grew 8%
- E-commerce sales increased more than 15%
- Membership fee income rose 14%
That last point is important, because unlike other retailers, Costco relies heavily on membership fees to boost its bottom line. It’s because of the membership fees it collects that Costco is able to offer such incredible prices on everyday products and specialty items alike.
Meanwhile, much of Costco’s membership fee income comes from Executive members, who pay $130 a year for Costco access and receive more benefits than Basic Gold Star members, who pay $65 a year.
As of the end of Costco’s last fiscal quarter, the company had 38.7 million Executive members.
Put another way, nearly half of Costco members have, at this point, joined at the higher tier. And Costco has, in turn, been rewarding Executive members by boosting the number of perks they’re entitled to.
That decision has been met with a fair amount of backlash. In spite of that, it’s a smart move for Costco overall.
Costco is a warehouse giant that depends on membership for a good percentage of its revenue.
Image source: David Paul Morris/Bloomberg via Getty Images
Costco keeps adding incentives for Executive members
Over the past few months, Costco has made a number of meaningful changes to the Executive membership program.
It used to be that the primary benefit of being an Executive member was earning 2% cash back on most Costco purchases. Now, Executive members get to enjoy a couple of other huge perks.
Perhaps the most notable one is early shopping hours. On weekdays, Executive members get access to Costco one hour earlier than Gold Star members. On weekends, Costco’s doors open 30 minutes early for Executive members to shop.
Related: Costco quietly adds extended hours for members
Costco also recently introduced a $10 monthly credit on same-day grocery orders of $150 or more for Executive members.
By adding these incentives, Costco is hoping that more of its members will upgrade to the Executive tier, and that its current Executive members will keep paying $130 a year for store access. The more membership fee revenue Costco can collect, the more leeway it has on pricing.
A big reason people join Costco in the first place is the savings on everyday goods. Costco is able to undercut its competition by using membership fee revenue to offset its costs, allowing it to accept lower margins on the items it sells.
Making Executive members happy is a winning strategy
While Costco’s recent changes have been positive ones for Executive members, not everyone is happy about them.
Some Gold Star members have complained about being treated as second-class citizens, while Costco employees have moaned that early store hours place an unwanted burden on those tasked with getting inventory prepared for customers.
Despite this backlash, Costco’s decision to cater to Executive members makes sense.
During the company’s most recent quarter, Executive member purchases made up 74.2% of Costco’s net sales. So it’s in Costco’s best interest to keep Executive members happy, even if Gold Star members feel a bit slighted in the process.
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Plus, it’s not as though Executive membership is an exclusive club. Gold Star members can upgrade at any time, and at no risk. Anyone who upgrades and isn’t happy with that decision can revert to a Gold Star membership after the fact and get refunded the difference.
Many retail experts, in fact, feel that Costco’s decision to cater to Executive members makes sense.
“This is yet another brilliant move by Costco, which continues to run rings around most other retailers. By treating its best customers best, it reinforces why you should be a best customer.”
Warren Shoulberg, seasoned retail industry journalist
It’s also important to recognize that Costco’s recent Executive member policies don’t take perks away from Gold Star members.
Costco didn’t cut its store hours for Gold Star shoppers. It simply added hours where Executive members could shop exclusively. And that actually benefits Gold Star members indirectly.
If Executive members increasingly take advantage of Costco’s early shopping hours, it could lead to smaller crowds later on. In that scenario, everybody wins.
Maurie Backman owns shares of Costco.
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