A Costco membership pays you to belong. An RH membership charges you to have belonged.
Both companies charge an annual fee for access to better prices. The surface similarity is where the resemblance ends. Underneath, they run on opposite math, and the math predicts everything, including why Costco renews roughly 90% of its members every year while RH lost 43% of its membership in four years.
A membership is worth it when the per-purchase benefit times your purchase frequency beats the annual fee. Costco sells groceries, gas, and staples. You shop roughly 50 times a year. The $65 to $130 fee is recovered in weeks and every trip after is surplus. RH sells furniture. You buy it once a decade. The $200 fee recurs every year while the one-time 30% discount sits waiting. Over five years you have paid $1,000 for a benefit you may never use again. The rational move with an RH membership is to join, buy, then cancel. RH's own SEC filings show that is exactly what its members did.
- Costco gross margin on goods: roughly 11 to 12%. It earns the bulk of its operating profit from membership fees, not merchandise. [Confidence: HIGH]
- Costco member renewal rate: approximately 90% worldwide, higher in the US and Canada. [Confidence: HIGH]
- RH gross margin: approximately 44%, a luxury-retail margin. [Confidence: HIGH, from 10-K.]
- RH membership fee: about $200 per year today, up from roughly $100 at the 2016 launch. [Confidence: HIGH]
- About 98% of RH revenue comes from members. The public non-member sticker is largely a fiction; the real price almost everyone pays is sticker times 0.70. [Confidence: HIGH]
- RH membership count fell from roughly 459,000 (January 2022 peak) to approximately 262,000 by January 2026, a 43% decline. [Confidence: HIGH, successive 10-Ks]
How a membership is supposed to work
A paid membership is a frequency instrument. You pay a fixed annual fee. In exchange you get a per-purchase benefit: lower prices, free shipping, a discount. The fee only makes sense if you buy often enough that the accumulated benefit beats the fee.
That is the whole equation:
A membership is worth it when (per-purchase benefit × purchases per year) > annual fee.
Everything below is that inequality, applied to two companies that land on opposite sides of it.
Costco: the membership that aligns with you
Costco's model inverts normal retail. Most retailers profit on the markup of what they sell. Costco barely does, it runs its goods at a thin gross margin (roughly 11 to 12%, far below a normal retailer) and makes the bulk of its operating profit from membership fees themselves. [Confidence: HIGH on the structure; the "profit is the fee" framing is well-documented.]
- Costco's incentive is to give you the lowest possible price on the goods, because it is not trying to profit on the goods. It profits when you renew the membership.
- Gold Star membership runs about $65 per year; Executive about $130 (raised in 2024). [Confidence: HIGH]
- You shop weekly-ish: groceries, household staples, gas. High frequency.
If membership saves you even a modest amount per trip and you make roughly 50 trips a year, the fee is recovered in the first few weeks and everything after is pure member surplus. The model aligns the company and the customer. Costco wins when you save money. That is a rare and durable structure.
RH: the membership that works against you
RH borrowed the word "membership" and almost nothing else.
- RH profits on the markup, not the fee. Its gross margin is approximately 44%, a luxury-retail margin, the opposite of Costco's thin one. [Confidence: HIGH, from 10-K]
- The fee, about $200 per year, buys you 30% off RH's already-premium prices, plus interior-design service. [Confidence: HIGH]
- About 98% of RH revenue comes from members. The public non-member price is largely a fiction; the real price nearly everyone pays is sticker times 0.70. [Confidence: HIGH]
- You buy furniture once every 5 to 10 years. Low frequency. This is the whole problem.
Run the same inequality, and watch it go negative. [Estimates below: $200/yr fee × years. The discount is a one-time event at purchase; the fee recurs annually whether you buy or not.]
$200 a year for a benefit you already used
Fee math: $200 per year, compounding against a one-time discount event. The discount fires once, at renovation. The fee fires every January regardless. Estimates only; labeled as such.
Fee math: $200/yr × years. Estimates only; labeled as such. The discount is a single event; fees recur every year regardless of purchases.
The model comparison
Side by side, the two structures are easier to see than to describe.
| Factor | Costco | RH |
|---|---|---|
| Annual fee | $65–$130 | ~$200 |
| What the fee unlocks | Near-wholesale pricing on all goods | 30% off sticker + interior-design service |
| Where the company profits | The membership fee itself | The ~44% gross margin on goods sold |
| Purchase frequency | Weekly (groceries, gas, staples) | Once per renovation (5 to 10 years) |
| Incentive alignment | Company profits when you save money | Company profits on markup regardless of membership |
| The math at 5 years | Fee recovered in weeks; surplus every trip | $1,000 in fees; one discount event used in Year 1 |
| Renewal rate | ~90% worldwide [Confidence: HIGH] | ~57% over four years (43% left) [Confidence: HIGH, 10-Ks] |
| Rational member move | Renew every year | Join, buy, cancel. Rejoin next renovation. |
The math showed up in the membership count
This is not theory. RH's own SEC filings trace the unwind.
| Fiscal year-end | Members |
|---|---|
| January 2022 (peak) | ~459,000 |
| January 2023 | ~351,000 |
| February 2024 | ~281,000 |
| February 2025 | ~265,000 |
| January 2026 | ~262,000 |
[Confidence: HIGH, successive RH 10-K filings.]
A 43% decline from peak, roughly 197,000 members gone in four years. Some of that is the COVID-renovation surge unwinding. But the structural floor underneath it is the frequency mismatch: once a member finishes the project that justified joining, the fee has no recurring benefit to defend it. A pre-COVID dip in FY2019 (before any macro shock) already hinted the program had hit its ceiling. [Confidence: MED on causation split; HIGH that the decline is real.]
The fee went up while the value stayed flat
RH's fee history: roughly $100 at launch in 2016, rising to $175, then approximately $200 today. [Confidence: HIGH.] The fee doubled. The benefit, a discount per purchase event, did not. Purchase frequency is set by how often you renovate, which RH cannot control. So RH raised the price of a membership whose underlying value is capped by a purchase cadence it does not control. That widens the negative-ROI gap rather than narrows it.
Costco also raised its fee in 2024, but Costco can, because the value (weekly savings) scales with a frequency that stays high. The same action means opposite things in opposite models.
The principle (this is the part worth remembering)
Strip both examples down and you get a rule that works on any membership you are ever offered:
A membership rewards you in proportion to how often you buy. The right question is never "how big is the discount?" It is "how often will I actually use it?"
- High frequency (Costco, Amazon Prime, a coffee subscription, a wine club): the fee is recovered fast and every use after is surplus. The company profits from your loyalty, so it is motivated to keep the underlying price low. Membership = a deal.
- Low frequency (furniture, mattresses, appliances, anything you buy once a decade): the recurring fee outruns the one-time benefit. The company still profits on the markup, so the fee is extraction layered on top. Membership = a toll.
RH applied a high-frequency mechanism to a low-frequency category. That was the structural error, and it was baked in from launch. No amount of marketing fixes a fee that goes negative after one purchase.
The RH membership is worth it for exactly one buyer: someone mid-renovation who will spend enough at RH in the next 12 months that a one-time 30% off clears the $200 fee several times over, and who then cancels. For that buyer, in that window, it is a straightforward discount. Join, buy, cancel. Rejoin in a decade if you renovate again. For everyone else, a membership held across years of not buying furniture is a recurring charge for a benefit already used. That is not a scandal and RH is not hiding it. It is a structural mismatch between a membership mechanism and a once-a-decade product. The fee just quietly accrues on the wrong side of the equation. Costco earns its renewal every week. RH has to hope you forget to cancel.
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Is the RH membership worth it?+
For one buyer: someone mid-renovation who will spend enough at RH in the next 12 months that a one-time 30% off clears the $200 fee several times over, and who then cancels. For everyone else, the fee recurs annually while the one-time discount sits unused. Join, buy, cancel. Rejoin when you renovate again.
How does RH membership compare to Costco?+
They are economic opposites. Costco profits from the membership fee, not the merchandise, so it is motivated to keep goods cheap. RH profits on the 44% gross margin of what it sells, so the membership is a toll on top of a premium price in a low-frequency category. Same word, opposite math.
What does the RH membership actually save you?+
Thirty percent off sticker. The fee is about $200 per year, up from roughly $100 at the 2016 launch. The benefit is a one-time discount at a rare purchase. Over a five-year renovation cycle the fee accumulates to $1,000, which eats most or all of the discount. [Estimates labeled as estimates.]
Why did RH membership numbers fall so sharply?+
From roughly 459,000 members at the January 2022 peak to about 262,000 by January 2026, a 43% decline. Source: successive RH 10-K filings. Once a member finishes the renovation that justified joining, the recurring fee has no benefit to defend it. Rational members cancel.
When is a paid membership actually a deal?+
When the per-purchase benefit times your purchase frequency beats the annual fee. High-frequency categories like groceries, gas, and household staples make Costco a deal for most members. Low-frequency categories like furniture make the recurring fee outrun the one-time benefit.
Is Costco's membership model sustainable?+
Yes, by design. Costco earns the bulk of its operating profit from membership fees, not merchandise margins (roughly 11 to 12% gross margin on goods). That aligns the company with the customer: cheap goods drive frequency, frequency drives renewals, renewals are the profit. The renewal rate sits around 90% worldwide.