Costco’s controversial new policy says something troubling about the economy
By Inc. | Published: 2025-11-04 10:00:00 | Source: Fast Company – leadership
Costco is known for adoring its fans, and its leadership wants the discount supermarket chain to remain beloved. Costco co-founder and former CEO James Sinegal He believes so strongly in keeping customers happy that he is driven to use profanity to express the strength of his feelings.
“You can’t say ‘People are our most important product’ and then put up signs everywhere saying ‘People are our most important product’ and then treat them like they’re insignificant…’ Your customers or suppliers will see that you don’t really mean it he recently told an interviewer.Â
Which is why the recent policy change by the retailer is so great
Starting this month, Costco began mandating a New feature for Executive Class members.who pay $130 per year instead of $65 for a Gold or Business membership. Now those who pay extra get an extra hour to shop in relative peace in the morning (except on Saturdays, when they get just an extra half hour), separate from the hoi pollois of the chain’s often crowded stores.
This may seem like a small change, but it illustrates not only the major choice that business leaders committed to customer delight, like Sinegal, have to make, but also something fascinating about the direction in which the American economy as a whole appears to be headed.
Positive aspects of tiered pricing
From a direct revenue maximization perspective, the new rules make sense. Executive class members make up 47 percent of Costco’s shoppers but generate 73 percent of its revenue. Add to that fierce competition from the likes of Sam’s Club and BJ’s, and attracting more customers with premium memberships would be a clear economic win.
“Costco’s early access benefit to Executive Members is more than just a customer benefit — it’s a smart application of behavioral economics. By leveraging exclusivity and Loss aversionCostco creates perceived value that can justify the $65 premium between membership levels He explains luck. “Industry analysts note that this move could accelerate executive membership conversions.”
The new perks are clearly pleasing to many premium members. “It’s a convenient shopping environment, not survival of the fittest.” enthused one Reddit user. “I could have come back without waiting in the giant line and then gone and spent $200 somewhere else.” “Win, win!” another wrote
Not everyone is happy with Costco’s new policy
But for every happy Premium Member, there’s another shopper unwilling and unable to pay double to shop at Costco. They are not happy about it
“I canceled my membership immediately for a 100 percent refund. The company violated the terms under which I revoked my membership. I burned a gallon of gas getting there at the usual time, had trouble walking and had no regard. I was told to wait 1/2 hour. I will stick with BJ’s and will continue to treat me with respect one complained on Facebook.Â
Some Costco workers also complained about the move to open early to cater to premium members. “We are struggling to open (at) 9:45.” I can imagine it would be fun every morning in trading One Reddit representative commented.Â
As Sinegal himself noted, people notice when you don’t treat them with respect. For some employees and customers, it’s clear that moving to tiered membership treats some people with more respect than others.
Goodbye middle class, hello premium price
Only time will tell if Costco will lose more customers like the angry Facebook poster above than it gains from new premium memberships. But other business leaders who are considering offering differentiated services that make their product experience relatively worse for other customers should be aware of these trade-offs.
It’s a decision that more and more leaders seem to be considering. As management consultant Daniel Correll points out in A Great article on New York TimesWith the advent of expensive upgrades at Disney theme parks, companies are increasingly looking for ways to cater to their more upscale customers and extract more profits from them.
More and better data Amnesty International The assistance enables businesses to target and reach these customers. But the real driving force behind the growing popularity of premium pricing is the fundamental transformation of the US economy
“this”. The middle class has been greatly eroded“In terms of size and purchasing power—and the wealth of our highest earners has exploded—so that the most important market for America today is its rich market,” he writes.
What does Costco’s new policy say about the economy?
Correll notes that while a lot of fundamental economic data, such as unemployment and household income levels, have looked good on paper over the past few years, consumers have reported feeling Incredibly negative. He says it’s a mystery that can be partly explained by tiered pricing like Costco’s new policy.
People notice that you “treat them like crap.” And watching others with more resources move to the front of the queue certainly makes many people feel insignificant.
It might be a good short-term business strategy to just say hell with it, let them cook, and get the proceeds. The question remains as to what this bitter dynamic might do to business – and the nation – in the long term.
-Jessica Stillman
This article originally appeared on “Fast company”Sister publications, a company.
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(tags for translation) costco
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