Costco makes major change to stop membership sharing
It’s a well-known aspect of the Costco shopping experience: customers must show their membership cards to a staff member at the entrance. This practice is about to evolve as Costco requires customers to scan their membership cards at the store entrances. This new system is aimed at further securing membership privileges and reducing fraudulent activities.
New Entry System for Members
Costco operates 882 stores globally, with 611 in the U.S. and Puerto Rico and 108 in Canada. Under the new policy, customers will need to press the barcode or QR code from their membership cards against a scanner to gain entry. While staff will still greet customers at the entrance, nonmembers must be accompanied by a member to enter the store. If a customer’s membership card has expired or if they are not a member yet, they will be directed to a membership desk to either renew or sign up.
Costco began testing the electronic scanning entry system in January at select locations, paving the way for its wider implementation.
Fighting Fraud and Membership Abuse
This move comes as retailers, including Costco, seek to combat theft and membership abuse. Costco has faced challenges with nonmembers using someone else’s card to access the store’s low prices, a practice known as membership-sharing that is prohibited. By implementing this scanning system, Costco aims to tighten its membership policies and ensure that only paying members can enjoy its discounted pricing.
Costco charges an annual membership fee, which recently increased from $60 to $65 for regular Gold Star members as of September 1. The fee for the Executive Card membership has also risen from $120 to $130, with customers earning a 2% reward on their purchases. The maximum yearly reward will increase from $1,000 to $1,250. Prior to the July decision to raise fees, Costco had not adjusted its membership prices since 2017.
Mixed Reactions from Customers
Reactions to the new scanning policy have been mixed among Costco shoppers. Some express concerns that the new entry process may cause delays and inconvenience, while others appreciate the streamlined approach, arguing that it is necessary given the number of individuals attempting to shop at Costco without a valid membership.
The Importance of Membership Revenue
Membership fees are a crucial part of Costco’s business model, significantly contributing to its profits and allowing the company to maintain thin profit margins on its goods and services. Costco has experienced rapid growth thanks to its warehouse-style presentation and competitive pricing.
In the stock market, Costco has seen its shares rise 27% this year, with prices increasing by 3.6% to $839.52 as of Thursday afternoon. In comparison, the S&P 500 and Nasdaq Composite have gained slightly over 11% this year. With a market capitalization exceeding $372 billion, Costco ranks as the third-largest U.S.-based retailer, trailing only Amazon (AMZN) at $1.75 trillion and Walmart (WMT) at $544 billion. Home Depot (HD) follows closely in fourth place at $345 billion.
