Costco Wholesale has announced significant changes to its business strategy, impacting membership fees, employee wages, and its diversity policies. Effective May 1, the retailer will increase its annual membership fees for customers in Korea by up to 15%, as part of its efforts to adjust to market conditions and continue its growth.
The basic Gold Star membership will see its cost rise from 38,500 won to 43,000 won, which is approximately $3 or 11.7% increase. The rates for Business and Executive memberships will also increase, with Executive Members enjoying enhanced benefits as their cashback rewards cap rises to 1.2 million won from 1 million won. This decision follows a similar adjustment made last September for U.S. and Canadian customers, where the basic membership price was raised from $60 to $65, marking the first hike since 2017.
But Costco isn’t just raising prices; it’s also making bold moves on the employment front. The company informed its U.S. employees last week of its plans to increase hourly wages for most store workers to more than $30. This increase will occur gradually over three years, with the highest earners seeing their pay increase by $1 annually until it hits $30.20, and the lowest earners receiving raises of 50 cents to $20. Costco's CEO Ron Vachris stated, “With these changes, we believe our hourly wages and benefits will continue to far outpace others in the retail industry.”
These developments come at a time when Costco is also facing scrutiny for its commitment to diversity, equity, and inclusion (DEI). The company has remained steadfast against pressures to abandon its DEI efforts, which have come from various political groups, including attorneys general from 19 states. Despite former President Donald Trump's executive order urging the cessation of such initiatives, Costco shareholders voted to uphold these policies at their recent annual meeting. Kevin O'Leary, a prominent investor and shareholder, publicly criticized the decision, asserting, “They're nuts if they think I want them fighting the federal government on policy.”
O'Leary, who has emphasized merit-based hiring practices, indicated concern over potential negative impacts on Costco's business and urged the retailer to reconsider its stance. He stated, “At the end of the day, when you piss off the federal government, you cost shareholders money, and that's exactly what happened here.” While he advocates for merit-based hiring, the company has countered by highlighting how DEI policies attract diverse talent and benefit the shopping experience.
Analyst Lindsey Stewart from Morningstar Sustainalytics weighed in, stating, “Even if the political environment on inclusion is changing, investors' low propensity to support anti-DEI resolutions is unchanged.” This remark reflects the cautious optimism within the investment community toward Costco’s strategies and their alignment with broader consumer values.
Costco finds itself at a crossroads where its operational decisions have sparked both internal and external discussions. By increasing membership fees, raising employee pay, and affirming its commitment to diversity, the company aims to navigate the competitive retail environment effectively.
Operating 19 stores across Korea, Costco has reported impressive sales figures, with 6.53 trillion won recorded from September 2023 to August 2024, reflecting a 7.6% year-over-year increase. This solid performance underlies the rationale for its recent adjustments and highlights Costco's resilience and adaptability.
Overall, these strategic business decisions signal Costco's intent to maintain its market position as it responds to both consumer demands and societal pressures. Whether these changes will reinforce customer loyalty and attract more shoppers remains to be seen, but Costco’s leadership is clearly committed to balancing profitability with responsible corporate practices.