Costco Korea, the local unit of the US-based warehouse retailer, recently announced a double-digit hike in membership fees, sparking concerns over potential customer attrition amid a sluggish domestic consumption environment.
Costco Korea said Tuesday it plans to raise the prices of its three types of annual memberships — Gold Star, Business and Executive — starting in May, marking the first increase in eight years, since 2017.
The Gold Star membership, for individual customers, will rise by 11.7 percent, from 38,500 won ($28) to 43,000 won. The Business membership, for corporate users, will increase by 15.2 percent to 38,000 won, while the Executive membership, which offers 2 percent cashback on purchases, will be raised by 7.5 percent to 86,000 won.
The increased fees will apply to all memberships that expire or renew after May.
Costco currently holds the top spot among warehouse-style discount retailers in Korea.
In fiscal year 2024, Costco Korea reported 6.53 trillion won in revenue and 218.5 billion won in operating profit — up 8 percent and 16 percent, respectively, from the previous year. Its annual revenue surpassed 4 trillion won in 2019 and crossed the 5 trillion won mark during the pandemic in 2021.
“A significant portion of Costco Korea’s customers are business members who regularly purchase essential supplies for their operations," said Lee Jong-woo, a professor of business administration at Ajou University. "Given this, the 15 percent hike is unlikely to lead to major customer attrition. It’s a similar case to Coupang’s Wow membership, which saw few customers leave despite the sudden announcement of a fee increase.”
However, Lee predicted that for new customers, the price hike will certainly be a major barrier to entry. "Still, it appears Costco is willing to take that risk in order to boost revenue in Korea," Lee added.
Globally, Costco raised its membership fees in the US and Canada last September, increasing the prices for Gold Star and Executive memberships by 8.3 percent. In Japan, where membership fees are also rising alongside Korea, the increase for the Gold Star membership is 9 percent. Costco explained that Korea's increase is higher due to the country's "rapidly changing business environment" and "rising operational costs."
Meanwhile, the domestic industry points out that competition from local warehouse retailers could change the game.
A prime example is Shinsegae Group’s Traders, a homegrown warehouse discount chain that is rapidly catching up to Costco.
Traders’ revenue surged 133 percent in just seven years, from 1.52 trillion won in 2017 to 3.55 trillion won last year. Unlike Costco, Traders operates in an open warehouse format that does not require annual membership to shop. Its private-label brand “T Standard,” offering around 120 essential high-value household items, is seen as a competitive strength.
“Whether Traders can attract new customers and overtake Costco will ultimately depend on their store expansion capacity from now on," said an industry source who requested anonymity. "But since Emart is currently underperforming, Traders is essentially covering Emart’s losses. While existing Traders locations are doing well, expanding the number of stores will likely remain difficult for the time being.”
Since last year, Costco has also raised the local prices of its private label brand, Kirkland, along with those of food, supplements, alcoholic beverages and household goods, many of which have seen increases of more than 10 percent.
Critics argue that Costco has been slow to improve consumer benefits in Korea, despite reaping substantial profits.
Its US headquarters, which fully owns Costco Korea, received 150 billion won in dividends in 2024 and 200 billion won in 2023 — more than Costco Korea’s net profit of 141.7 billion won that year.
Meanwhile, Costco Korea's local social contributions remain limited, raising concerns about a potential consumer backlash. In 2024, the company donated 1.22 billion won — less than 1 percent of the dividends sent to its US headquarters.
hykim@heraldcorp.com
