Costco heavily pushing Executive Memberships in store?

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Costco heavily pushing Executive Memberships in store?

Post by Super S »

I made a regular trip to my usual Costco today. Nothing was really unusual until at checkout. The cashier asked if I was interested in upgrading to an Executive Membership. (I currently am a Business Member) I told her I was not interested. After I paid and started heading for the door, another Costco employee comes up to me and asks my name, and was also asking abut the membership, I guess he was up front being notified via the computer/POS to talk to me (and possibly others) further about the Executive Membership. Perhaps I was "flagged" because I purchased a computer through Costco online a while back, but I normally do not buy many big ticket type of items at Costco. In a typical year I would not buy enough to make the 2% cash back pencil out for double the membership fee. I mentioned, for a second time, that I was not interested.

I found this whole episode a little off-putting. It kinda reminded me of the guys who used to wander around at Sears trying to sell siding etc. to earn a commission. I really hope that this is not the direction Costco is going...if this starts happening often I will consider ending my membership.

Has anybody else encountered this?
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Re: Costco heavily pushing Executive Memberships in store?

Post by HCal »

Yup, at my store they have people who will ask you for your card before letting you into the self-checkout area. If you don't have executive, they will give you the pitch. Sometimes you have to be firm with them. "I already told you I'm not interested" works well.
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Re: Costco heavily pushing Executive Memberships in store?

Post by ClownLoach »

This is nothing new at Costco or Sam's. Costco makes the gross majority of their annual profit on membership fees and is effectively a nonprofit retailer otherwise because they only put about a 5% markup on merchandise and then spend that 5% on employee payroll, keeping the lights on, building new warehouses, and the actual membership reward checks. So basically they are baking in the reward check amount in the prices of every item and if you are downgraded to a regular membership you're paying the cost of others executive rewards in your purchase. They've always sold prorated upgrades, and they target customers making big ticket purchases like computers and TVs. Having said that - many times the big ticket purchase is enough to offset the price of the upgrade especially if you're towards the end of the membership before renewal. I upgraded about a decade ago this same way, was only about $11 to upgrade for the rest of the year but I was buying an item that would be worth more than that in rewards. And my refund check each year has more than exceeded the total cost of membership since I upgraded. Between the Executive membership and the Costco credit card I get hundreds of dollars back each year so I basically no longer pay for membership and I have some extra money to put towards something fun each year. Sam's now puts the prorated cost right on the self checkout screen if you haven't upgraded and tells you how much you've missed out on YTD in Sam's Cash. If you use Costco or Sam's as primary stores for most of your spending and you haven't upgraded your membership then basically you are paying more than you should be every time you shop. Finally just from a business perspective Costco brags to investors that their renewal rates now exceed 95%. I'm guessing that for the customer who is worried about the cost of membership it's a heck of a lot easier to renew that $120 membership when you have a reward certificate that lands two months before the membership is due that wipes out most or all of the cost - why wouldn't you renew at that point if it's nearly free?
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Re: Costco heavily pushing Executive Memberships in store?

Post by storewanderer »

Costco's system isn't very sophisticated so I am somewhat impressed the system alert somehow prompted the second employee to "find you" but it is quite odd the second employee may have somehow gotten your name so somehow the point of sale must have communicated to some other system your name and that you declined the "upgrade."

I don't like the idea at all of being approached after paying. I would decline and not engage further and keep walking. What is next, have the receipt checker try to sell you the upgrade?

The Executive is usually a pretty easy sell for Costco because most people who go to Costco spend enough that the membership basically pays for itself. I do wonder how many people throw away their voucher or never redeem it, as I have found expired vouchers attached to the credit card statements on more than one occasion when going through old records for some people or organizations I know. I was not one of those people, and I have not been hassled about it either, or ever even asked. I think generally making very small purchases and never having a cart when I go there, the employees are smarter than average and realize it is not worth offering to me.

At Sam's Club there is always a sales pitch if you see a human employee for just about anything except in the pharmacy where they don't seem to bother. Now that I think about it I think in the pharmacy they scan a generic membership card like the snack bar. At the self checkout a yes/no prompt comes up on the screen but the employee does not say anything about it. Sam's Club is limiting curbside service to "Plus" members only so that appears to be their current carrot to twist people's arms into upgrading.
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Re: Costco heavily pushing Executive Memberships in store?

Post by ClownLoach »

storewanderer wrote: September 20th, 2022, 9:46 pm Costco's system isn't very sophisticated so I am somewhat impressed the system alert somehow prompted the second employee to "find you" but it is quite odd the second employee may have somehow gotten your name so somehow the point of sale must have communicated to some other system your name and that you declined the "upgrade."

I don't like the idea at all of being approached after paying. I would decline and not engage further and keep walking. What is next, have the receipt checker try to sell you the upgrade?

The Executive is usually a pretty easy sell for Costco because most people who go to Costco spend enough that the membership basically pays for itself. I do wonder how many people throw away their voucher or never redeem it, as I have found expired vouchers attached to the credit card statements on more than one occasion when going through old records for some people or organizations I know. I was not one of those people, and I have not been hassled about it either, or ever even asked. I think generally making very small purchases and never having a cart when I go there, the employees are smarter than average and realize it is not worth offering to me.

At Sam's Club there is always a sales pitch if you see a human employee for just about anything except in the pharmacy where they don't seem to bother. Now that I think about it I think in the pharmacy they scan a generic membership card like the snack bar. At the self checkout a yes/no prompt comes up on the screen but the employee does not say anything about it. Sam's Club is limiting curbside service to "Plus" members only so that appears to be their current carrot to twist people's arms into upgrading.
There isn't anything systemic at Costco sending alerts. They're still running AS/400 systems from the 80's. The employees who are assigned to selling Executive memberships are very well trained and will either work the lines with a RF Gun scanning cards and offering upgrades or if they don't have such equipment available they will move from register to register. The employee probably stood back and saw the customer name which appears on the little 'green screen' on the employee side when the card is scanned (it will show your name on the top line and original membership signup date until the next item is scanned). They hunt for big ticket item purchases because they are most likely to be successful in selling upgrades to those customers. As far as it being between the register and the door - they have a dedicated register along the wall for supervisors and upgrades; if they sold you on an upgrade at Merchandise Pickup for example they would take you to that special register, return the item then do the upgrade and rebuy on a new transaction. In the stores that sell a lot of jewelry and high end electronics the upgrade employee will hang out by Merchandise Pickup as it is very easy to sell upgrades there (and these guys are really good at calculating 2% of the purchase price in their head); if there is a diamond ring going out and that customer wasn't an Executive usually the pickup employee will give a hand signal to the upgrade associate to sign their log as the "witness" and then they can quickly say "I see you didn't earn X dollars on today's purchase with executive membership" and go on from there.

Clearly it is a program with a double edged sword. The most successful employees for the company are probably too pushy for most customers. But there are likely many customers that do not understand that the badly named program is an opportunity for them to save money each year. If they found out they could have received a significant discount on their purchases and they felt Costco didn't tell them about it they would also be angered, and Costco does not offer any kind of retroactive upgrade. Costco today is probably 97% consumers shopping and 3% businesses (unless the warehouse is a Business Center) but most customers still think of it as a business store and may believe that Executive Membership is for business executives not them.

As far as old unredeemed certificates go, they will say on the form they cannot be replaced if lost or expired but Costco customer service line will reissue them anyway. The credit card now emails the certificate for its separate reward check and places it in the Citibank app as well so it's much less likely to be lost. Costco was testing automatic redemption in Washington state a couple of years ago where they would keep applying whatever rewards you had earned automatically to your purchases until all were spent but that test was discontinued. I would not like this as I hold onto the certificate until I see a discretionary item I want to buy; I wouldn't be happy to be forced to spend my rewards on things like produce and laundry detergent. This does show that they clearly want their customers to spend the certificates though; obviously they're working to make it easier to redeem them instead of counting on customers to lose them and bank the money. I expect that the executive reward will move to the Costco App very soon, the same way Sam's Club has moved their Plus reward there. (I think the real reason for moving to a automatic spend or digital program is that they could manage it more like a gift card - right now the entire certificate has to be spent on a single transaction and if the customer doesn't spend it all they give a cash refund for the difference - I would imagine that they never intended to hand out physical cash back in this 2% reward scheme)

Sam's also gives free shipping to Plus members. It's very handy for large items you don't necessarily need to take home immediately. I wanted a large barbecue that was heavily discounted at end of season but there was no way it was going to fit in my car without risking scratching up the interior. They wound up sending it via a LTL carrier who delivered it palletized which could not have been cheap. That delivery alone cost them more than my Plus upgrade expense.
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Re: Costco heavily pushing Executive Memberships in store?

Post by storewanderer »

I get the impression the primary benefit of Costco "Executive" is that rebate check each year. Period. Is there really any other benefit?

With Sam's Club Plus I get the feeling there are more benefits and also more of a "we will go the extra mile to take care of the customer" sort of approach for the Plus member. Sam's is the underdog and has to try harder. And they do try harder, and try consistently. Ability to have pick up, free delivery, Scan and Go, etc. I notice Sam's website has quite a few items available for shipping that are not carried in the local store (but carried in other stores) and will ship those items. I have gotten some regional food items this way that are not typically sold out west. Costco does not do this, they offer less than what the local club offers and nothing more when it comes to consumable food. As ClownLoach points out Sam's Club made good on a free delivery that clearly cost them a lot to do, but they did it and executed it well following through with their benefit of free delivery for Plus member.
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Re: Costco heavily pushing Executive Memberships in store?

Post by mbz321 »

Employee here. About once a month, usually over a weekend period, they set up 'blocks' on the registers to specifically target people that might benefit from upgrading. Currently however, they are doing it over a 9 day period. That being said, the system is very flawed and it often just flags people willy-nilly based on all sorts of different criteria, not everyone that it flags would truly benefit (OTOH, there are many members that it actually would benefit, like would receive checks for several hundred dollars back every year, but no amount of convincing will get them to upgrade).

Now in my region, we have someone every day assigned going around the front end trying to get Upgrades, basically going up to people at random that look like they have full shopping carts. Some of the people they choose for this task are incredibly pushy, and as a cashier (my usual position), it's incredibly awkward to be stuck in the middle of a conversation when the member clearly isn't interested and just wants to get on with their day. They want us to get 10 a day, which gets harder and harder to meet. Most of the time, they are already Executive...it's a giant waste when that person would be better utilized actually ringing, but hey, I'm not in charge. Members are getting annoyed by the whole thing and I've honestly told many people to express their frustration with corporate.

Instead of worrying so much about upgrades every day, maybe we should take a look at the useless 'self' checkouts where there is rampant card sharing and that's just membership $$$$ walking out the door.

Now as for benefits, there are additional discounts for executive members like rental car/travel discounts, car insurance discounts, (ofc I don't pay for a membership, but I use the company Costco partners with for car insurance and the Executive discount alone that I receive would basically cover the difference in membership levels every year) discounts on business services, etc.
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Re: Costco heavily pushing Executive Memberships in store?

Post by mbz321 »

ClownLoach wrote: September 21st, 2022, 11:38 am I expect that the executive reward will move to the Costco App very soon, the same way Sam's Club has moved their Plus reward there. (I think the real reason for moving to a automatic spend or digital program is that they could manage it more like a gift card - right now the entire certificate has to be spent on a single transaction and if the customer doesn't spend it all they give a cash refund for the difference - I would imagine that they never intended to hand out physical cash back in this 2% reward scheme)
Before a couple years ago, Costco allowed to straight-up cash out the executive check. That changed around 2021 and they now state, Not Redeemable For Cash (although I've heard this was due to some change in tax law, but not sure how true that is). If the check is partially used, change is still given as cash though, and now pretty much everyone knows the trick to getting the cash is just to buy something cheap like a bunch of bananas, and using their certificate for it. I would say Costco might move it to the app if they weren't so technologically inept, but now that Costco offers digital gift cards, they should really just issue them that way (or better yet, a physical card as the digital cards can't be used at the 'self' checkouts or gas station) and end the 'cash back' nonsense.
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Re: Costco heavily pushing Executive Memberships in store?

Post by ClownLoach »

storewanderer wrote: September 22nd, 2022, 12:13 am I get the impression the primary benefit of Costco "Executive" is that rebate check each year. Period. Is there really any other benefit?

With Sam's Club Plus I get the feeling there are more benefits and also more of a "we will go the extra mile to take care of the customer" sort of approach for the Plus member. Sam's is the underdog and has to try harder. And they do try harder, and try consistently. Ability to have pick up, free delivery, Scan and Go, etc. I notice Sam's website has quite a few items available for shipping that are not carried in the local store (but carried in other stores) and will ship those items. I have gotten some regional food items this way that are not typically sold out west. Costco does not do this, they offer less than what the local club offers and nothing more when it comes to consumable food. As ClownLoach points out Sam's Club made good on a free delivery that clearly cost them a lot to do, but they did it and executed it well following through with their benefit of free delivery for Plus member.
I still think that Costco, for the most part, doesn't want to do much of an online business but they feel the pressure from Wall Street that they must be an e-commerce business. They would benefit from only selling high ticket items online like major appliances where there is a cost benefit in reduced distribution costs (vendor to main warehouse to deliver to customer, versus vendor to main warehouse to store to customer). Sam's probably can do e-commerce at a lower cost because they use the entire Walmart DC network plus converted about a dozen stores a few years ago into e-commerce only DCs.

I believe that the Executive Membership now gives an extra extended warranty on major appliances and TVs if used in conjunction with the Costco Visa card. For some TVs it was extending the warranty up to 7 years at no extra cost, a tremendous bargain when you see shady practices at other electronics stores that want more than 1/3rd of the price of the TV for a couple of extra years (and now some of those extended warranty plans come with deductibles and have a cap on claims! They're definitely not a... best buy... If you purchase one of these new low end plans from certain unnamed unscrupulous retailers). But how often does the customer need a new TV or refrigerator?

They should at least match Sam's offer of free shipping no matter what for Executive Members, but instead many Costco.com items are priced higher than in store with "free shipping" so you are still really paying for it.
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Re: Costco heavily pushing Executive Memberships in store?

Post by storewanderer »

I think Costco knows the online thing is a bad idea for them as their items are heavy (difficult to ship) and Costco makes a ton of impulse sales to people who go into the warehouse. Costco is excellent at making impulse sales in store and moving people online would severely cripple those efforts.

Sam's Club on the other hand strikes me as, over the years, rather poor at making impulse sales. At Sam's they seem to have the same old stuff, sitting in the same old place, time after time. Once in a while new stuff pops up. So in the case of Sam's, I'm not sure how much in impulse sales they have to lose by pushing people to online. But I could see them picking up some customers who are just shopping for basics and knowing Costco for online is clumsy at best, would just use Sam's since it is so much better for online with more items available and more options for pick up, and at the end of the day if you're ordering paper products, dog food, and a giant box of cereal do you really care if it comes from Sam's or Costco?

But at Costco they seem to move stuff around constantly. This pushes impulse sales by exposing people to items they missed before because they didn't venture down every aisle.

Those warranty extensions I believe require you to keep that Executive Membership active for the entire warranty period (if you end up claiming the warranty service that is) right? That is a good way to keep people consistently holding Executive.

I wonder if there is a good way to quantify how much they are losing with "shared memberships" at self checkout. They should do some tests on that. Basically require verification of photo on the card at a location or two's self checkouts for an entire day and see how much membership sharing takes place and also pay attention to how many carts get abandoned when the customer notices someone is checking the photo on the card because I think those abandons could safely be assumed as membership share attempts. This type of monitoring would measure just how often this happens. Is it happening 5 times a day out of 1,000+ transactions (I have to assume there was membership sharing happening at full service lanes before too; the photos on the cards are awful and if Bob Smith in his 50's with grayish hair balding gives his card to Ed Jones who looks rather similar and comes in and pays cash at a cashier nobody is going to detect that either...) or is it happening 50 times in a day with very pervasive attempts like a female customer shopping alone trying to use Bob Smith's card... or people scanning pictures of other people's cards and not even having a card...
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