Does Costco really make all its profit from membership fees?
Membership fees matter, but the executive question is how a paid relationship changes traffic, pricing power, and the economics of the warehouse.
The question
Does Costco really make all its profit from membership fees?
The fee matters. Follow it from the card to the cart.
- Costco 2024 Form 10-K · Membership Fees — Part II, Item 7, p. 25, “Membership Fees”: table reports $4,828 million for FY2024, $4,580 million for FY2023, and $4,224 million for FY2022. The same passage reports year-end renewal rates of 92.9% in the U.S. and Canada and 90.5% worldwide.
- Membership at Costco — Membership benefits and household-card description.
The visible fee
The fee is the part you can see.
Costco describes paid membership as access to its low-price warehouse offer.
A paid membership opens access to the warehouse offer.
Membership = access: Costco presents membership as entry to warehouse value.
- Costco 2024 Form 10-K · Membership Fees — Part II, Item 7, p. 25, “Membership Fees”: table reports $4,828 million for FY2024, $4,580 million for FY2023, and $4,224 million for FY2022. The same passage reports year-end renewal rates of 92.9% in the U.S. and Canada and 90.5% worldwide.
- Membership at Costco — Membership benefits and household-card description.
The recurring test
The fee starts a recurring test.
After paying, members judge the relationship through the usefulness of each trip.
The member pays for access.
The warehouse supplies the trip.
The member judges its value.
Renewal starts the loop again.
- Membership at Costco — Membership benefits and household-card description.
- Costco 2024 Form 10-K · Membership Fees — Part II, Item 7, p. 25, “Membership Fees”: table reports $4,828 million for FY2024, $4,580 million for FY2023, and $4,224 million for FY2022. The same passage reports year-end renewal rates of 92.9% in the U.S. and Canada and 90.5% worldwide.
At renewal
Renewal is the verdict.
The fee is charged once. Its value is judged again when renewal comes around.
At sign-up: a promise.
At renewal: a verdict.
- Costco 2024 Form 10-K risk factors — Risk Factors; dependence on membership renewal and competition.
- Membership at Costco — Membership benefits and household-card description.
The warehouse offer
The warehouse carries a short list.
Costco describes limited selection, low prices, high volumes and inventory turnover as connected choices.
Costco describes a limited selection.
Bulk goods move through high-volume operations.
Limited selection: Costco describes a limited assortment.
Sold in volume: The filing links high volumes with warehouse operations.
- Costco 2024 Form 10-K · Business — Part I, Item 1, pp. 3–4, “General”: limited selection and low prices, high volumes and inventory turnover, volume purchasing, distribution, reduced handling, and warehouse floor plans. The “Membership” section follows on p. 4.
The member's trip
The basket makes the promise concrete.
Members experience a trip and the goods in the cart. That experience supplies evidence for the recurring value test.
The member makes a trip.
The offer becomes a basket.
The next trip remains a choice.
A trip: The customer experiences the warehouse visit.
A basket: Bulk goods make the offer concrete.
A reason to return: The value test continues after checkout.
- Costco 2024 Form 10-K · Business — Part I, Item 1, pp. 3–4, “General”: limited selection and low prices, high volumes and inventory turnover, volume purchasing, distribution, reduced handling, and warehouse floor plans. The “Membership” section follows on p. 4.
- Costco 2024 Form 10-K · Membership Fees — Part II, Item 7, p. 25, “Membership Fees”: table reports $4,828 million for FY2024, $4,580 million for FY2023, and $4,224 million for FY2022. The same passage reports year-end renewal rates of 92.9% in the U.S. and Canada and 90.5% worldwide.
- Membership at Costco — Membership benefits and household-card description.
Repeat visits
Repeat visits keep the warehouse working.
Costco describes high volumes and inventory turnover. Repeat use is part of the operating model, not a measured margin effect here.
Costco describes high volume and turnover.
A member can return to the same warehouse.
Repeat use is an operating possibility, not a measured margin effect.
High volume: Costco describes high volumes and inventory turnover.
More trips: The same warehouse can serve members again.
Same building, more use: This is an operating model, not a measured margin effect.
- Costco 2024 Form 10-K · Business — Part I, Item 1, pp. 3–4, “General”: limited selection and low prices, high volumes and inventory turnover, volume purchasing, distribution, reduced handling, and warehouse floor plans. The “Membership” section follows on p. 4.
Two reported lines
Membership fees are one line on the income statement.
For FY2024, Costco reported membership-fee revenue and operating income as separate measures.
Membership fees: $4.8 billion.
Operating income: $9.3 billion.
Rounded as in the cited filing explanation. Revenue is not profit; these bars are separate measures and are not added together.
- Costco 2024 Form 10-K · Consolidated Statements of Income — Part II, Item 8, p. 36, “Consolidated Statements of Income” (USD millions; 52 weeks ended September 1, 2024): membership fees 4,828; operating income 9,285; net income attributable to Costco 7,367.
Keep the boundary clear
The fee is one part of the result.
Merchandise, operating costs and competition still shape the year. The filing does not attribute all profit to membership fees.
Merchandise shapes the result.
Operating costs shape the result.
Competition shapes the result.
- Costco 2024 Form 10-K · Business — Part I, Item 1, pp. 3–4, “General”: limited selection and low prices, high volumes and inventory turnover, volume purchasing, distribution, reduced handling, and warehouse floor plans. The “Membership” section follows on p. 4.
- Costco 2024 Form 10-K · Membership Fees — Part II, Item 7, p. 25, “Membership Fees”: table reports $4,828 million for FY2024, $4,580 million for FY2023, and $4,224 million for FY2022. The same passage reports year-end renewal rates of 92.9% in the U.S. and Canada and 90.5% worldwide.
- Costco 2024 Form 10-K · Consolidated Statements of Income — Part II, Item 8, p. 36, “Consolidated Statements of Income” (USD millions; 52 weeks ended September 1, 2024): membership fees 4,828; operating income 9,285; net income attributable to Costco 7,367.
- Costco 2024 Form 10-K risk factors — Risk Factors; dependence on membership renewal and competition.
- Membership at Costco — Membership benefits and household-card description.
A counterfactual
If trips worsen, renewal gets harder.
Imagine the fee stays the same while a trip feels less useful. This is a thought experiment, not a Costco forecast.
- Costco 2024 Form 10-K risk factors — Risk Factors; dependence on membership renewal and competition.
- Membership at Costco — Membership benefits and household-card description.
The system
Each trip has to earn the next renewal.
The fee opens access. Warehouse value gives members a reason to return. Operations have to keep the offer credible.
The fee opens access.
The warehouse makes the offer.
Volume meets operating discipline.
Renewal restarts the test.
The system has to earn the next year.
- Costco 2024 Form 10-K · Business — Part I, Item 1, pp. 3–4, “General”: limited selection and low prices, high volumes and inventory turnover, volume purchasing, distribution, reduced handling, and warehouse floor plans. The “Membership” section follows on p. 4.
- Costco 2024 Form 10-K · Membership Fees — Part II, Item 7, p. 25, “Membership Fees”: table reports $4,828 million for FY2024, $4,580 million for FY2023, and $4,224 million for FY2022. The same passage reports year-end renewal rates of 92.9% in the U.S. and Canada and 90.5% worldwide.
- Membership at Costco — Membership benefits and household-card description.
- Costco 2024 Form 10-K risk factors — Risk Factors; dependence on membership renewal and competition.
The answer
No. The fee is the entry point.
Membership revenue matters. Costco still has to earn renewal and manage every cost behind the offer.
The answer is no.
The fee opens the economics; it does not explain all profit.
- Costco 2024 Form 10-K · Business — Part I, Item 1, pp. 3–4, “General”: limited selection and low prices, high volumes and inventory turnover, volume purchasing, distribution, reduced handling, and warehouse floor plans. The “Membership” section follows on p. 4.
- Costco 2024 Form 10-K · Membership Fees — Part II, Item 7, p. 25, “Membership Fees”: table reports $4,828 million for FY2024, $4,580 million for FY2023, and $4,224 million for FY2022. The same passage reports year-end renewal rates of 92.9% in the U.S. and Canada and 90.5% worldwide.
- Costco 2024 Form 10-K · Consolidated Statements of Income — Part II, Item 8, p. 36, “Consolidated Statements of Income” (USD millions; 52 weeks ended September 1, 2024): membership fees 4,828; operating income 9,285; net income attributable to Costco 7,367.
A principle to carry forward
When a business charges for access, test the return.
Ask what customers get after paying, how often they feel its value, and what happens at renewal.
What do customers get after paying?
How often do they feel the value?
What happens at renewal?
- Membership at Costco — Membership benefits and household-card description.
End of Breakdown
The fee is only as strong as the next trip.
A paid relationship lasts when members keep finding a reason to return.
- Costco 2024 Form 10-K · Membership Fees — Part II, Item 7, p. 25, “Membership Fees”: table reports $4,828 million for FY2024, $4,580 million for FY2023, and $4,224 million for FY2022. The same passage reports year-end renewal rates of 92.9% in the U.S. and Canada and 90.5% worldwide.
- Membership at Costco — Membership benefits and household-card description.
Sources and limitations
- Costco 2024 Form 10-K · Membership Fees — U.S. Securities and Exchange Commission
Part II, Item 7, p. 25, “Membership Fees”: table reports $4,828 million for FY2024, $4,580 million for FY2023, and $4,224 million for FY2022. The same passage reports year-end renewal rates of 92.9% in the U.S. and Canada and 90.5% worldwide.
Supports Costco’s reported membership-fee revenue and renewal rates. Fee revenue is a reported revenue stream, not a profit allocation.
FY2024 ended September 1, 2024 (52 weeks); amounts are USD millions.
- Costco 2024 Form 10-K · Business — U.S. Securities and Exchange Commission
Part I, Item 1, pp. 3–4, “General”: limited selection and low prices, high volumes and inventory turnover, volume purchasing, distribution, reduced handling, and warehouse floor plans. The “Membership” section follows on p. 4.
Supports Costco's description of the linked merchandise, pricing, warehouse, and membership choices; it does not measure the profit from any one choice.
Company description of its FY2024 operating model, not independent causal proof.
- Costco 2024 Form 10-K · Consolidated Statements of Income — U.S. Securities and Exchange Commission
Part II, Item 8, p. 36, “Consolidated Statements of Income” (USD millions; 52 weeks ended September 1, 2024): membership fees 4,828; operating income 9,285; net income attributable to Costco 7,367.
Supports the three displayed income-statement line items. Their presentation does not identify how much company profit was caused by membership fees.
FY2024 amounts are company-reported; no causal attribution or segment allocation is inferred.
- Membership at Costco — Costco Wholesale
Membership benefits and household-card description.
Costco presents membership as paid access to warehouse value and benefits.
Customer-facing U.S. page; benefits vary by market.
- Costco 2024 Form 10-K risk factors — U.S. Securities and Exchange Commission
Risk Factors; dependence on membership renewal and competition.
The filing identifies renewal, value perception, competition, and operating execution as connected risks.
Original illustrative scenes are not documentary evidence.
