Cash-Strapped Consumers Hesitant to Spring for Full-Priced Wholesale Club Memberships

With ongoing financial challenges prompting consumers to make more conservative spending changes, major membership wholesale clubs’ latest promotions suggest they are having trouble getting shoppers to spring for full-priced memberships.

In the last few weeks alone, Costco brought back its $20 membership deal, BJ’s Wholesale Club kicked off an offer to provide $20 memberships (provided that consumers agree to auto-renew) with the added perk of $20 store credit reward, and Sam’s Club dropped a $14 membership offer.

Times of economic distress should have their advantages for wholesale clubs, which promise consumers better deals by enabling them to buy in bulk. To an extent, this holds true. Costco noted in its last financial results that revenue from membership fees was up year over year. BJ’S noted a 6.5% rise in membership fee income. Sam’s Club parent company Walmart shared in its last earnings report that the chain saw membership income up 10.%.

However, it seems that the initial hurdle of the membership cost may be keeping many consumers from defecting from their previously preferred retailers. According to a PYMNTS Intelligence survey, 52% of consumers have switched to merchants with lower prices to buy retail products, but only 44% have done the same for buying grocery products.

Consumers want a bargain. Per last year’s study “Consumer Inflation Sentiment: The False Appeal of Deal-Chasing Consumers,” which drew from a survey of more than 2,100 United States consumers, indicated that 44% of grocery shoppers are deal chasers, willing to go wherever they will get the best price.

This price consciousness comes as consumers are forced to dedicate a significant portion of their paycheck to affording their basic needs, per the February/March PYMNTS Intelligence study “New Reality Check: The Paycheck-to-Paycheck Report: Why One-Third of High Earners Live Paycheck to Paycheck.”

The report’s survey of more than 4,200 U.S. consumers found that shoppers expect to spend, on average, 20% of their personal income on groceries and household expenses, and that share jumps to nearly one-fourth for those who make less than $50K annually. The study also revealed that 60% of shoppers have cut down on nonessential retail purchases, and half have turned to cheaper retail merchants due to product price increases.

Plus, the vast majority of consumers have made changes to how they buy groceries. Supplemental research from PYMNTS Intelligence’s study “Consumer Inflation Sentiment: Consumers Cautiously Spend More Amid Lower Inflation” revealed that 86% of grocery customers have made changes to their purchasing behavior in response to price increases. Fifty-eight percent have cut back on nonessential grocery purchases, making this the most common change.

While revenue from membership fees has seen an uptick for some chains, the reluctance to commit to the initial membership cost suggests that many consumers are prioritizing bargains and affordability over loyalty to specific retailers.

As shoppers navigate financial challenges and allocate a significant portion of their income to basic necessities, their inclination toward deal-chasing and cost-saving measures becomes more pronounced. With a majority of consumers adapting their grocery shopping habits in response to price increases, warehouse club chains are adapting to meet this demand.