Costco’s business model has always been deceptively simple. The warehouse retailer sells groceries, electronics, appliances, and even gold bars at razor-thin margins. It then makes a huge chunk of its profit from membership fees.
In its fiscal second-quarter 2026 earnings report, Costco said membership fee income rose 13.6% year over year to $1.36 billion. The company ended the quarter with 40.4 million paid memberships, up 9.5% from last year, while total paid members reached 82.1 million.
Membership renewal rates in the U.S. and Canada were exceptionally strong at 92.1%.
These numbers help explain why Costco keeps investing heavily in getting new shoppers into its ecosystem. Once people join, they tend to stay for years — or decades.
And I would know.
I’ve been a Costco member for roughly 20 years, and I’ve seen firsthand how the company turns occasional shoppers into loyal customers.
When I first joined Costco, I’d do a stock-up once a month but do most of my shopping elsewhere. Nowadays, I shop at Costco weekly, and not just for groceries and household products. I also shop there for low-cost apparel, over-the-counter medication, and a host of other products.
If the executive team at Costco were to look at my purchase history, they’d probably pat themselves on the back for converting me from a monthly shopper into a frequent one. And the company no doubt wants to add more people like me to its membership roster.
Costco rolls out a major membership promotion
The nice thing about membership fee revenue for Costco is that it’s free money. Costco makes money off of my Executive membership fee whether I buy 12 things during the year or 627.
At the same time, Costco firmly believes that its memberships offer a ton of value — so much so that it’s willing to refund membership fees for customers who regret buying one. For this reason, Costco doesn’t offer discounted memberships often.
So when a promotion along those lines pops up, it pays to pounce.
Related: Costco leans into new consumer dining trend
Right now, Costco is offering one of its biggest membership promotions yet for new members who enroll in auto-renewal. New Gold Star members receive a $20 Digital Costco Shop Card, while new Executive members get a $40 Digital Costco Shop Card.
The deal applies to shoppers who are completely new to Costco or whose memberships expired at least 18 months prior. Members must sign up for automatic renewal and provide a valid email address to receive the digital reward card. The offer is available through Costco’s membership sign-up page.
The promotion effectively lowers the first-year cost of a Gold Star membership to $45 and the Executive membership to $90. And while it’s a bit out of character for Costco, the short-term discount is likely worth it if it convinces newer shoppers to become long-term members.
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Costco’s success starts with member loyalty
A big part of the reason I continue to renew my Costco membership is that I like the way I’m treated as a customer.
Costco executives regularly emphasize that member trust and retention sit at the center of the company’s business model.
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During the company’s most recent earnings call, CFO Gary Millerchip highlighted the company’s continued membership momentum, saying its successful quarter was “driven by continued growth in our membership base and upgrades to Executive memberships.”
Of course, Costco knows that retaining members isn’t just a matter of offering low prices. The company also needs to keep the shopping experience exciting. To that end, Costco has long focused on its treasure-hunt shopping experience.
As someone who’s gone in for a few grocery items only to leave with beach chairs, random kitchen gadgets, and giant cheesecakes, I can tell you from firsthand experience that Costco’s approach to inventory totally works.
Still, it’s my membership fee that allows me to make impulsive purchases that may strain my budget a bit but pad Costco’s bottom line. So it pays for Costco to continue to invest in member incentives and occasional promotions.
“The most important item we sell is the membership card,” CEO Ron Vachris told Fortune. “Everything we do supports that transaction.”
Maurie Backman owns shares of Costco.
