Costco Forced to Make Key Change Members May Not Like

The warehouse club lost a key partner and members may not like its solution.

Costco (COST) – Get Free Report offers members a mix of stock items and services alongside an ever-changing selection of goods that makes visiting a warehouse a bit of an adventure.

You know that certain things will be there, while you also have the fun of not knowing what else you might find.

Yes, you can come home with your grocery staples, a filled prescription, and all the basics you expect — but you may also become the proud owner of a 6-foot teddy bear or a new kayak. It’s a mix of predictability and a treasure hunt that makes your membership more valuable.

And the setup has helped the chain steadily add members while keeping its membership-retention rate around 90%. 

Because it’s a member-driven business, Costco carefully weighs changes to its partners and core services. Not every member might buy eyeglasses or hearing aids from the warehouse club, but the ones who use those services consider them a key reason to renew year after year.

Now, a fairly major change has happened at Costco that’s beyond the company’s control, but that may not stop members from being upset.

Costco Loses a Key Partner

Costco has a number of partners that expand its core offerings. One of those was Wireless Advocates, a third party that offered the warehouse club’s members phone service from T-Mobile (TMUS) – Get Free Report, AT&T (T) – Get Free Report, and Verizon (VZ) – Get Free Report.

The shutdown happened abruptly on Dec, 5 and Costco “was apparently blindsided by the news, finding out along with employees that the partnership was ending due to company shutdown,” TMO.report reported.

Apparently, the wireless company shut down while giving no notice to employees or its partners. Many workers learned that they no longer had jobs via an email sent later that day or when they showed up to work and were not able to clock in as the company’s systems had been shut down.

“The news not only affects T-Mobile retail sales but also AT&T and Verizon. Wireless Advocates handled sales for all three carriers in Costco locations, as well as some military bases. According to a cache of the Wireless Advocates website (which no longer exists as of this morning), the company had a presence in at least 535 Costco stores and 65 military bases,” the website, which is devoted to covering T-Mobile, reported.

Costco Adds a New Mobile-Phone Partner

T-Mobile now appears to be Costco’s favored mobile partner, or at least its most aggressive. The wireless company has actually sent employees to select Costco warehouses to sell phones, services, and connected devices directly to the chain’s members.

Now, the chain has expanded that relationship to 178 Costco locations, about a third of its U.S, stores, TMO.report said. The website obtained some internal documents detailing the expanded relationship, which will draw workers from nearby T-Mobile stores.

“The documents go on to say that essentially, managers at nearby corporate-owned T-Mobile stores will be sending some of their employees to these Costco locations. Employees will either be scheduled to work at the T-Mobile store location or the Costco each day,” the website reported.

T-Mobile is also giving people incentives to open accounts or add lines at the warehouse club.

“In addition, the documents confirm that the $35 Device Connection Charge will be waived for all customers making transactions in Costco locations,” the website added.

“Plus, customers have a 90-day return window on purchases at Costco. That’s a full two months more than the standard 30-day window for typical T-Mobile purchases.” 

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