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TehWildMan_ t1_j9zbpb4 wrote

The kinds of customers who would shop at warehouse clubs generally would have no issues spending about $60/year on a membership, and these warehouse club chains generally choose locations where there is no shortage of customers

If they didn't charge for memberships, prices would have to be adjusted elsewhere to make profit for the company.

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jzabkowicz t1_j9ze8lf wrote

Exactly. Costco gross profit margin is 13% compared to Walmart (not Sam’s Club) is around 24%.

By charging a membership fee you recoup some of that lost margin and encourage repeat business as customers look to recoup their membership fees through membership rewards.

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mynewaccount4567 t1_j9zwlz5 wrote

I don’t know if not charging for memberships would cause a price increase (at least directly to make up for membership revenue)

I think instead it’s a more binding loyalty program. Most people will only get a membership to one warehouse club. So once they have someone locked in a membership, they are very unlikely to shop elsewhere. Customers will be more likely to shop exclusively at their store. And getting people in the door is half the battle for grocery stores. They can then hope to pump up tabs with enticing impulse buys and high margin items

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