Costco quietly made a major benefit change

• Costco recently made some changes for Executive members
• It also gave them a small benefit that was not well publicized.
• The chain has also quietly added a new perk that's valuable to many members.

Costco very rarely makes changes to anything aside from its merchandise mix. The company moves very slowly and tends to let its rivals lead the way when it comes to new technology and other tweaks.

If something works, the warehouse club might adopt it, but generally, Costco keeps its operations steady as she goes.

Recently, however, the membership-based chain tweaked its hours to open earlier for Executive members. That's a move designed to reward the customer base that drives most of its sales.

CEO Ron Vachris explained the strategy during the company's fourth-quarter earnings call.

"To increase value and convenience for our members, on June 30, we added executive member exclusive operating hours in the mornings and additional hour on Saturday evenings for all members in our U.S. warehouses. We estimate these incremental hours have added about 1% to weekly U.S. sales since implementation. This has been very well received by our members," he explained.

Costco keeps adding benefits

Costco also made another small tweak to its Executive member benefits.

"In addition to the early opening hours for executive members, we also introduced a $10 credit per month on Instacart purchases greater than $150. Since announcing these new executive benefits, we've seen the meaningful increase in upgrades from Gold Star members to Executive Membership," Vachris added.

CFO Gary Millerchip's comments showed how important Executive members are to the chain.

"At Q4 end, we had 38.7 million paid executive memberships, up 9.3% versus last year. Executive members represented 47.7% of paid members and 74.2% of worldwide sales," he said.

Executive members pay $130 per year, while basic Gold Star members pay $65. In addition to the extra hours and Instacart benefit, the higher-tier members get 2% cash back on most purchases up to $1,250 per year.

Costco adds benefit for even more members

In addition to rewarding its Executive members, Costco also wants to incentivize customers to add its Costco Anywhere Visa card by Citi.

That's something Millerchip talked about during the company's earnings call.

"Well, for our credit card, it's an incredibly successful program for us, and we deliver a lot of incremental value to our members through the credit card, with the rewards that we offer and some of the additional benefits around travel as well. We did recently make some changes to our credit card, recognizing that we felt there was an opportunity to accelerate the value and also to continue to grow that program," he shared.

It's a small tweak, but a very meaningful one.

"And so we added an incremental benefit where the member can now receive 5% rewards on gas. We also updated and modernized the card itself as well. And we've been pleased so far with the reaction from members and the continued growth in that program," he added.

The 5% savings on gas benefit is a key change that builds on not just the value of the card, but also the value of a Costco membership.

Benefits of Costco Anywhere Visa card by Citi:

• 5% cash back on Costco gas, 4% on other gas/EV charging (up to $7K/year)
• 3% on restaurants and travel (including Costco Travel)
• 2% on Costco and Costco.com purchases
• 1% on all other purchases
• No annual fee (with paid Costco membership)
• No foreign transaction fees
• Doubles as your Costco membership card
• Purchase, travel, and rental car protection
• Citi Entertainment access (concerts, events)
• Annual reward certificate redeemable for cash or Costco purchases

Costco Credit Card drawbacks:

• Must have an active Costco membership
• Rewards only redeemable once a year (in-store or for cash)
• 1% base rate on most purchases
• 5% gas bonus capped at $7K/year
• No sign-up bonus or intro APR
• High regular APR
• Requires excellent credit
• Fewer travel/purchase perks than before

Costco has room for improvement

In addition to making changes to its credit card and giving new benefits to Executive members, Costco has also invested in technology. That's something GlobalData Managing Director Neil Saunders thinks is a smart idea.

"Costco can improve in areas like collect from store, checking what’s in stock at the warehouse, and making the ecommerce process easier. But this will all be selective: Costco isn’t going to offer every item for collection because some of its bulky products just don’t lend themselves to that kind of service, and most customers love visiting the warehouse. So, I’d say this is all more of a gentle technology evolution than a massive transformation," he told RetailWire.

Melissa Minkow, another ReailWire Brain Trust member, thinks Costco just needs to make backend changes to keep its members happy.

"Investing in technology doesn’t need to mean that you’re expecting tons of growth via digital channels — investing in technology can also/instead mean improving backend systems for a better in-store and/or omnichannel experience. It’s important that Costco evolve with the times, and investing in technology is synonymous with that," she shared.