Costco is different from other retailers in that it doesn’t just rely on markups to generate revenue. Costco’s membership fees are a goldmine.
During Costco’s third-quarter 2026 earnings call, the company reported $1.37 billion in membership fee income, up 10.7% year over year.
The company also boasted an impressive 92.2% membership renewal rate across the U.S. and Canada.
Costco has a number of strategies for keeping members happy and engaged. The company is known for more than its competitive prices; its Kirkland Signature brand also has an outstanding reputation for quality.
In addition, the company does a great job of rotating inventory to keep things fresh and promote its famous “treasure hunt” style shopping experience.
But investing in products and keeping prices low aren’t Costco’s only tickets to member retention. The company has also made a huge investment in its workforce, which has been a big part of its success.
Costco prioritizes employee happiness
The world of retail isn’t exactly known for employee retention or satisfaction. But Costco has long strived to be the exception.
Costco knows that its success hinges on the wellbeing of its employees. That’s why the company’s Careers page is quick to highlight the many perks of being a Costco employee, including:
- Industry-leading health care coverage
- Paid vacation and sick days
- A 401(k)
- Adoption assistance
- Disability coverage
- Life insurance
Costco employees also receive regular wage increases based on hours worked, while long-tenured workers are eligible for bonuses.
The company also emphasizes promoting from within. According to Costco, the vast majority of warehouse managers began in hourly positions, reinforcing the idea that retail jobs can become long-term careers rather than temporary employment.
Of course, there’s perhaps no better example of Costco’s culture of promoting workers internally than the company’s current CEO, Ron Vachris. Vachris started out as a forklift driver for Costco, and he’s clearly come a long way since.
“You’ve got to give people room to try new things,” Vachris told Fortune.
As a result, turnover after one year of employment at Costco is about 7%, which is well below the average turnover across the retail sector broadly, according to The Wall Street Journal.
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Happy employees lead to happier members
Employee benefits may seem unrelated to the shopping experience at first, but they’re actually closely connected.
Retailers with experienced employees often have lower turnover, meaning shoppers are more likely to interact with associates who know store layouts, inventory, and company policies. Veteran workers can answer questions more efficiently, resolve problems faster, and keep checkout lines moving.
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Consulting firm McKinsey says a better employee experience leads to a better customer experience, noting, “Satisfied employees stay longer, and employees with more experience make fewer errors, developing pattern recognition to solve unexpected problems.”
The fact that Costco also pays workers fairly helps a lot.
Costco recently boosted its maximum pay for hourly workers from $31.90 to $32.90 and increased its annual bonus, according to The Wall Street Journal. Higher wages allow workers to become more financially stable, which makes them less likely to jump ship.
In fact, many thousands of Costco’s U.S. hourly workers have more than $1 million in their 401(k)s, CFO Gary Millerchip told The Wall Street Journal.
While Costco is smart to invest in its Kirkland Signature line, improved checkout speeds, and other aspects of the shopping experience, at the core of it all is a workforce that’s educated, motivated, and content.
That has a direct impact on the member experience and Costco’s most important financial piece — renewal rates.
Maurie Backman owns shares of Costco.
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