Costco Membership Benefits in Canada – Review of cost and value

Costco is known for selling quality products in bulk at great prices along with a very good return policy, but other than accessing the pharmacy and food court, you have to pay an annual $60 membership fee to access the perks of shopping there. Is it worth becoming a member to buy their products?

Costco has over 10 million members and 105 stores across Canada and at least 1 store in every province except PEI. In 2021, their member renewal rate was 91% in the US and Canada and 89% worldwide, so they’re clearly worth it for a lot of consumers.

I’ve had a Costco Executive membership card for a little over a year now, and while I can’t say I enjoy the shopping experience – especially when compared to ordering groceries online at another discount store such as NoFrills or Walmart – the savings and convenience of being able to stock up on the basics less often more than makes up for it and makes the membership worth every penny.

The following is an in-depth review and analysis of Costco’s membership options and in-store experience to outline who would get the most benefit from having a membership and what I think are the best and least favourite parts about the retailer.

Bottom line

I recommend Costco for most households.

A Costco membership is worth it if:

• You live with at least one other person (ideally a larger household)
• You spend more than $1,200 per year on items that Costco carries
• You don’t mind crowds and line-ups
• You are aren’t particular about what brands you buy, as long as its good quality
• You have room in your home to store bulk products
• You have lots of freezer space (bonus points for a chest freezer, which they sell)
• You live relatively close (20 minutes) to a store

If this sounds like you, you can sign up and become a member in just a couple of minutes on Costco’s membership page. They make it clear that their legendary return policy also applies to memberships:

100% SATISFACTION GUARANTEE. If you are not satisfied with your membership, you’ll get a full refund on your membership fee.

A Costco membership is probably NOT worth it if:

• You live alone
• You spend less than $1,200 per year on items that Costco carries
• You dislike crowds and line-ups
• You prefer specific brands and having a wide selection to choose from
• You don’t have room in your home to store bulk products
• You have limited freezer space
• You live far away from the nearest location (>30 mins)
• You only have a Visa credit card

In general, Costco is ideal for shopping for consumable products that are re-purchased on a regular basis that are either non-perishable or have a long enough shelf life that you will be able to use up the bulk-sized amount before it goes bad such as tissue paper, frozen and canned goods. You can buy months or years worth of these for a great price.

For smaller families, this means focusing on shelf-stable food, frozen items, and non-food items such as toilet paper and cleaning supplies, while larger families can get through bulk purchases of products which have a shorter shelf life, such as dairy, produce and baked goods.

Membership feature comparison

Costco Gold Star vs Executive membership

Here’s how much the two options cost and how they compare:

All memberships give you access to all Costco locations globally and provide two membership cards – one for you and another you can give to someone else who is over the age of 18 who lives at the same address. This is referred to as a household or spouse card.

Gold Star membership cost and benefits

The Gold Star membership costs $60 per year.

Membership is worth it for most people. Assuming a conservative 5% in savings coming from the difference in markup of between Costco’s cap of 15% and other retailer’s 20% to 25%, you only have to spend $1200 per year, or an average of $100 per month to save $60 in markup. ($1,200 x 5% = $60)

Purchasing a single mid-to-large-ticket item such as an air fryer, cookware or TV at Costco can save you enough to justify the annual membership fee alone.

Executive membership cost and benefits

The Executive membership costs $120 per year. Its biggest additional benefit compared to the Gold Star is the 2% cash back reward that applies to most products, but the exclusion list includes things like membership fees, food court, Costco Services, gift cards, gas and milk.

Upgrading to the executive membership is immediately worth it if you and the other cardholder spend $3,000 in a year combined – or an average of $250 per month – the cash back reward is $60, covering the additional cost to upgrade.

If you and the other cardholder spend a combined $6,000 in a year combined – or an average of $500 per month – you will recoup the entire membership fee. Spending more than that means that your entire membership fee is covered and will have extra credit available, which never expires.

The reward is limited to $1000, so there is no additional cash back if you spend more than $50,000 in a 12 month period at Costco.

The reward adds up as you make purchases through the year and is mailed to you approximately 2 months before your membership expiry date along with the membership renewal notice. It can only be used toward in-warehouse purchases, not online purchases.

Combining this with a good rewards credit card can increase your earn rate to 3% or more.

In addition, Executive cardholders receive the following benefits:

• Receive Costco Connection magazine and Costco.ca insert by mail
• Extra benefits on select Costco Services such as insurance, payment processing and travel.
• Exclusive offers and additional discounts, such as in this example flyer (or in app):

You can upgrade online or:

• Visit the Membership Counter
• Call 1-800-463-3783

Business memberships

There are also two memberships exclusively for licensed businesses and nonprofits: Business and Business Executive.

These provide access to Canada’s 5 Costco Business Centres and costcobusinesscentre.ca which have longer hours, provide a wide selection single-serving snacks, drinks and catering items which cater to small businesses. They also get competitive prices on services targeted toward small businesses, such as payroll services, credit card processing services, and more.

Business card holders may add up to 6 primary cardholders at $60 each per year, which come with the usual second card for a household member.

They are also allowed to purchase products for resale, as long as they provide Costco with the appropriate resale information. 

Benefits of Costco

Costco’s markup is capped at 15%

Unlike other retailers who use value-based pricing to set their prices at the maximum that customers are willing to pay based on demand, time of year and other factors, resulting in markups of 25% to 50%, Costco uses cost-plus pricing and caps its markup at 14% for outside brands and 15% for in-house brands (Kirkland). The average markup is just over 11%.

In 2022, Costco’s gross margin (difference between revenue and cost of goods sold, divided by revenue) was 10.94%, 3.45% operating margins (after all expenses and before taxes), and 2.57% net profit margin (after taxes).

They are able to keep their markup lower thanks to the following efficiencies:

• Purchasing higher volumes of a smaller selection of products. They carry about 4,000 products compared to the 30,000 found at most supermarkets and sell $25 billion worth of those products in Canada every year. 
• Their no-frills, self-service warehouse facilities are cheaper to maintain and reduced handling of merchandise means it’s cheaper to stock the shelves.
• Stocking the store can be done quickly, so stores don’t need as many associates, and can afford to pay the ones they have higher wages.
• Paying their employees well and checking customer receipts on the way out leads to a lower rate of shoplifting, employee theft, and administrative error (known as “inventory shrinkage”) 0.12% of sales, compared to the retail industry average of 0.5% to 1%.

However, this does not mean all products are cheaper all of the time. In 2018, Business Insider reported that Costco beat Amazon’s per-unit pricing on 80 out of the 100 products surveyed and tied on 7 products, leaving 13 that were cheaper at Amazon.

It’s worth saving your receipts and comparing per-unit prices with other stores to ensure you’re getting the best deal. It’s certainly possible to find better deals on Amazon, especially if you’re a Prime Member.

Warranty extension

Costco automatically extends the manufacturer’s warranty for major appliances and electronics to 2 years from the date of purchase.

Basically legendary return policy

Costco’s return policy is as generous as they come. Their “Risk-Free 100% Satisfaction Guarantee” allows customers to return most items for any reason anytime after purchase for a full refund, if they don’t meet your satisfaction. 

Exceptions include electronics and major appliances, which they will accept returns for within 90 days. Products with a limited useful life such as tires and batteries may have a limited warranty. Custom products that are manufactured to a customer’s specifications cannot be returned, and alcohol and cigarette returns are prohibited as by law.

They normally require a receipt, but at the discretion of the warehouse manager, a product may be returned without one if it can be verified as a Costco product. 

It is not, however, a “no-questions-asked” return policy so be prepared to explain how and why it did not meet your satisfaction.

Orders made through Costco.ca can be returned to a warehouse or via Costco.ca’s pickup and refund. Orders delivered to your home must be repackaged and ready for pickup in the same manner as it was delivered. Fill out the Costco.ca Online Return Form to start the pickup and refund process. This can take up to 3 to 4 weeks.

Price adjustment policy

Costco will refund the difference between the price you paid and the sale price of any items within 30 days of purchase – essentially price matching themselves. They do not price match with other sellers.

To request an adjustment, go to the Membership Counter of your local warehouse. Price adjustment requests for online orders can be made on Costco.ca.

Focus on quality

The products at Costco are not necessarily the cheapest possible option you can find. You can likely find as cheap or cheaper clothing, tires, olive oil and pet food elsewhere. However, they focus on ensuring a consistent level of quality. Very, very little of what Costco sells is cheap junk like what you might stumble into on Walmart, Amazon, Alibaba and Shein. Instead, they focus on providing known and trusted brand name quality at low prices.

By managing a fraction of the number of products and carefully choosing products based on quality, price, brand, and features, the company can offer the best value to members.

You can buy without having to worry about the product being harmful or completely useless and without having to compare and decide between dozens of options. Think of it as Costco doing a lot of the initial research and selection work on your behalf.

On the flip side, this means selection is limited.

Plethora of services

Most Costcos have many or all of the following departments and rather than being tacked-on services that offer their convenience at higher prices, they offer better deals than you can find anywhere else on glasses, dispensing fees, gasoline and more:

• Fresh produce
• Fresh meat
• Fresh deli
• Bakery
• Food court
• Pharmacy
• Hearing aids
• Optical department
• Photo centre
• Gas station
• Propane
• Tire service centre

Drawbacks of Costco

Product selection is limited

As I mentioned, Costco carries 4,000 products compared to the 30,000 found at most supermarkets and 120,000 to 140,000 at Walmart stores.

This means that they won’t have every brand, model and colour under the sun – limiting their selection to the fastest-selling models, sizes, and colours. Of the kinds of products they sell, there are typically between 1 to 3 (typically 2) options to choose from, rather than the half a dozen or more you’d find at other retailers.

If you have specific, preferred brands and products you like to buy, that may not be available at Costco now, or ever. What they have is what’s available.

On the other hand, this means you can be sure that what’s offered will be of a vetted, consistent quality. And this isn’t to say they don’t have certain products – the store sells a little bit of everything you might need – from groceries to caskets to hot tubs and ebikes.

Constantly changing, confusing layout

Costco stores are laid out as a racetrack retail grid, which leads the customer around the entire store so they can see almost all of the available products before reaching the checkout line and the exit. 

In addition, the basics – toilet paper, eggs, milk, bread – are located near the back of the store so that customers have to walk through the whole store to find the necessities. 

To top this off, aisles aren’t labelled, stores relocate their products and up to a fifth of its stock is limited-quantity items kept in stores for as little as a week to create what the company calls a “treasure hunt” experience for their customers. This includes rotating out products for a time

The confusion this creates is by design. It is all an intentional marketing scheme to get customers distracted, wandering around the store and feeling a sense of urgency and FOMO in the hopes they pick up a few non-essential, impulse purchases along the way.

Crowding in the lot and aisles

The hustle and bustle of the car traffic in the parking lot and cart traffic in the store can be jarring.

The lots seem to almost always be packed close to the brim. The cart traffic in the aisles and wait time at checkout is typically what you’d experience in another discount store such as a Walmart or NoFrills during their peak hours – or worse.

You can’t expect to get in and out in a rush and you have to have a little patience.

Limited payment options

Costco Canada warehouses only accept Mastercard credit cards. If you only carry around a Visa or American Express, you’ll need to hit the ATM or bring cash or debit.

Online store is more expensive

Costco’s online selection is greater, with an average of 9,000 to 11,000 SKUs vs 4,000 in-store, however, the prices are typically higher, as noted on their online product pages:

“May be available In-Warehouse at a lower non-delivered price”

To benefit the most from your membership, you have to shop in-warehouse, which is certainly nowhere near as convenient as ordering your groceries online for pickup or delivery through PC Express or household products online from Amazon.

Bulk amounts require storage space

Want almonds? Here’s a kilogram.

How about dried apricots? Here’s 2 kg.

Dishwasher detergent? 8 kg

Costco is known for its larger package sizes, with everything seemingly coming by the 3, 10, 100, kilogram, or litre. This saves you money, but where will it all go once you get home? Extra pantry, freezer or other storage space is vital to taking full advantage of your membership.

Costco Membership Promo Code

Costco typically runs a membership offer several times each year for new members or those who haven’t had a membership for more than 18 months.

For example, you can sign up using the promo code COSTCO20 for Gold Star or COSTCO40 for Executive before September 25, 2022 and receive a online voucher code for $20 or $40 off a Costco.ca purchase of more than $100.

Or promo code COSTCO30 for Gold Star or COSTCO60 for Executive before December 18, 2022 and receive a online voucher code for $30 or $60 off a Costco.ca purchase of more than $100 or $200, respectively.

How to sign up for a new Costco membership?

You can sign up for a membership online on Costco.ca. You will receive your card in the mail in a few days.

Alternatively, visit your nearest Costco Wholesale location and go to the Membership Counter, which is near the exit by the food court. You will receive your card immediately.

How to renew your Costco membership

You can renew your membership on Costco.ca:

1. Sign in
2. Click on “Account”
3. Click on “Renew Membership”
4. If your account is not verified, provide your membership number and last name
5. Click on “Proceed to Checkout”
6. If your account is verified, you have the option to choose auto renew payment, and add the credit card information (Mastercard and Visa Debit).

You will receive a confirmation email when the renewal is complete.

• Alternatively, you can pay your renewal fee through online banking with any major bank. Search for: Costco Membership Renewal Fee under bill payments.
• Call Member Services at 1-800-463-3783, Monday to Friday, between 9 a.m. and 9 p.m. EST. Saturday to Sunday, between 9 a.m. and 7 p.m. EST
• You can also visit your nearest Costco Wholesale location and go to the Membership Counter.

How to shop at Costco without a membership

You can shop at Costco without a membership as long as you have a Costco Shop Card (gift card), which are available with a minimum balance of $50. To get in, you show your gift card to the employee at the entrance to get in. You only need one $50 gift card to get into the store, the remaining balance of your purchase can be paid for with credit or cash.

The catch is that Shop Cards can only be purchased or reloaded by Costco members, so you’ll still be reliant on a Costco member for access.

You may be required to go to the customer service desk so they can provide you with a “temporary pass” to shop at the store. They may also be required to listen to a sales pitch highlighting the reasons to buy a membership before being given the pass.

Can you use someone else’s Costco card?

No, you cannot lend your card to someone else or borrow someone else’s membership card to shop at Costco as the card is non-transferrable and has the cardholders photo on it. 

Members can bring up to 2 guests during each visit to a warehouse, but only the member is allowed to purchase items.

What is the Digital Membership Card?

If you prefer to carry your payment and loyalty cards on your phone rather than in a wallet or purse, you can download the Costco app from the App Store or Google Play and sign in to use the Digital Membership Card, which is accepted everywhere in-store except for Costco Gas Stations.

If you’re ready to sign up for a membership, you can check out all the details and become a member on Costco.ca.

Contact Costco

• Store locator: Find a Warehouse
• Phone: 1-888-426-7826 Monday to Friday: 8am to 10pm EST, Saturday and Sunday: 8am to 7pm EST
• Email: Form
• Address: 415 W Hunt Club Rd, Nepean, ON K2E 1C5
  

Customer reviews

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If you have a Costco membership we’re interested to know your thoughts. Do you think it is worth it? What are your (least) favourite things about the retailer?

Sources

• 2021 Annual Report
• 2021 Form 10-K