Costco (COST) is renowned for its robust business model, in which members pay an annual fee in exchange for high-value, low-cost merchandise. The company typically exhibits inflation-resistant characteristics because it offers highly competitive low prices, which can drive increases in both sales volume and revenue when prices rise. Notably, unlike most companies that pursue high gross margins, Costco adheres to a strategy of extremely low gross margins. The lower the prices, the greater the member loyalty and purchase volume, while membership fees are directly converted into company profit.
There has always been market demand for a low-price strategy, but Costco also has three lesser-known new growth drivers that are adding momentum to the company.
Executive members have long been a significant growth driver for Costco. In the United States, the fee is twice that of the standard membership ($65), granting members additional benefits such as cashback rewards and exclusive shopping hours. This segment continues to grow each quarter, consistently contributing incremental revenue.
In the third quarter of fiscal year 2026, ended May 10, the number of executive members increased by 9.6% year-over-year to 41.2 million. This group exhibits extremely high loyalty; although they account for only half of paid members, they contribute 75% of total sales.
Costco launched its executive membership service in China during the third quarter. Management stated that market activity has “exceeded our initial expectations.” Since entering the Chinese market in 2019, Costco has opened seven warehouse locations in the country. This region remains a massive long-term opportunity.
Costco has ventured into e-commerce, but its operating model differs from that of traditional retailers. Rather than directly delivering merchandise, the company offers digital services such as in-store pickup and partnerships with third-party delivery providers.
One of the recently introduced digital options is online registration. This service helps attract a broader pool of potential members, particularly younger consumers. Management indicated that online registration has lowered the average age of members, suggesting that these younger members are likely to remain within the Costco system for a longer period. However, this trend is also accompanied by slightly lower renewal rates.
One of Costco’s e-commerce offerings is same-day delivery through partner providers. In the United States, the average delivery time is 45 minutes, with customer satisfaction rated at 4.8 out of 5. The company is also expanding this service to other markets, including Spain and France.
Management reported that this service is growing faster than the overall digital business, and that the company’s highest-spending members are using it, thereby further enhancing customer loyalty.
Costco’s third-quarter sales increased 11.6% year-over-year, showing clear acceleration. By advancing the executive membership business in China, expanding online registration to attract younger customers, and developing same-day delivery services, the company has multiple levers to sustain its growth momentum. These three drivers not only help expand the member base but also deepen the loyalty and spending contribution of core members.
