Oxford Dictionary defines “Rip Off” as “cheat someone, especially financially“. Decide for yourself if Costco‘s behaviours discussed in this report meet this definition of “rip off” or there are simply a lot of “misunderstanding”?
New & long time Costco members caught in the scheme
Since the world plunged into Covid19 global pandemic in March 2020, millions of grocery shoppers in US, Canada, UK, and around the world have become brand new Costco members and started bulk buying. Who can forget news and social media photos of empty shelves of “essential goods” from toilet paper, household cleaning items, flour to even dry pasta. When medical experts advise us to physical distance and stay at home, bulk-buying at places like Costco seems like a good way to reduce our risk of contracting Covid19.
It may surprise some long time Costco members who have no idea that they have been caught in Costco‘s scheme for years. So the millions of new members who recently joined Costco since March of 2020 need to pay special attention and arm yourselves with knowledge in order to avoid being ripped off. For the record, this reporter’s family has a Costco membership. We shop at Costco periodically. One recent Costco experience was bad enough that it became the proverbial last straw and impetus to conduct this in-depth research and share with you these findings so you can judge Costco for yourself.
Guess what item
So what item does Costco rip members off the most? Hint: Some members get ripped off depending on your shopping habits and can add up to millions of dollars a year. Cosmetic, Costco chickens, or diamond rings? No, it’s what gets you in the door … your membership! For fiscal year ending August 30th 2020, Costco made a whopping $3.54 billion from membership fees.
By this reporter’s estimation (see below), Costco is potentially ripping off members worldwide from US$15 million to US$59 million a year, give or take a few million dollars. Not small change. So how does this scheme work?
The most troubling time of your Costco membership year
Costco membership agreements have pages of fine print. How many of the millions of new (since the start of the pandemic in March 2020) or existing 105.5 million worldwide members/cardholders have actually carefully read every word of the membership legal contract before they signed on the dotted line? One member in 50,000 or less?
You are not alone if you didn’t have time to read before signing it. Few years ago this reporter spent almost 10 minutes standing at the membership counter to read the legal fine print before giving up and signed on the dotted line without finishing like everyone else. Yes, this reporter is happy to say that bit of embarrassment has finally been corrected while researching for this report. Let’s take a quick look of the legal mumble-jumble and see if you notice the problem before it is explained with examples. Ready?
After reviewing five “Member Privileges & Conditions” contractual languages for renewals for Costco U.S. (pix), Canada (pix), U.K. (pix), Australia (pix), and Taiwan (pix), this reporter concluded that they are similar enough. So let’s look at the contractual languages used by the original and mother of all Costcos, Costco U.S. (pix),
“Memberships renewed within 2 months after expiration of the current membership year will be extended for 12 months from the expiration date. Memberships renewed more than 2 months after such expiration will be extended for 12 months from the renewal date. All renewals will be assessed at the membership fee in effect on the date the membership fee is paid.”
To make things easier to explain, we will use a concrete example with dates. Let’s say your membership expired on November 30th, 2020 (actually our family’s case), if you renew your membership within 2 months after expiration, even on January 30th, 2021, that is the last day of that “within 2 months” period, then you are one of the members that have been “ripped off“.
How so? Costco‘s contractual language forces you to pay 12 months of membership fee but only give you 10 months of membership benefits. Your renewed membership expiration date is unfairly backdated for two full months to November 30th, 2021, a rip off of 1/6 of the fee paid by loyal & renewing members! Making membership renewal time the most troubling time of your Costco membership. The kicker is that brand new customers signing up on the same date of January 30th, 2021 as you would get an honest expiration date of January 31, 2022.
How Costco China members are NOT ripped off?
Costco opened its first China store in 2019 August even though Costco co-founder and former CEO James (Jim) Sinegal first visited China over 25 years ago and had thought long & hard of how to be successful in China for years. This news clip posted by Guardian on Aug 28, 2019 is worth a thousand words of the business potential in China, “Opening-day frenzy at first Costco store in China“Read the rest of this entry »