Costco’s New Strategy Targets Membership Sharing Violations

According to The Street, Costco members are well aware of the entry process: to get into a store, you must show your membership card to a staff member at the entrance. The same process applies when entering the self-checkout line, where a staffer will also check for your photo on the card.

Costco to Require Scanning Membership Cards at Store Entrances

In a bid to streamline this process and increase security, Costco will soon require customers to scan their membership cards upon entry. The new system will allow members to scan either the barcode on their physical card or the QR code from the Costco app on their phone. Nonmembers will still need to be accompanied by a member to gain access. Although the card scanning process will be automated, a staffer will remain at the entrance to greet customers and provide assistance if needed.

If a membership has expired or a customer is not yet a Costco member, they will be directed to the membership desk to either renew or sign up for a membership. This system was first tested at select stores in January 2024 and is now being rolled out nationwide.

Costco’s Effort to Combat Membership Fraud

This move is part of Costco’s larger effort to combat fraud, specifically the issue of nonmembers using other people’s membership cards to take advantage of Costco’s low prices. Membership-sharing is against Costco’s policies, and the new scanning system aims to curb this practice.

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Costco charges an annual fee for membership: $60 for regular Gold Star members in the U.S. and Canada, with the fee set to increase by 8% to $65 on September 1. Executive Card memberships, which come with a 2% reward on purchases, will see their fee rise from $120 to $130, an 8.3% increase. The maximum yearly reward for Executive members will also increase from $1,000 to $1,250.

The membership fees are a key part of Costco’s business model, contributing significantly to its profits and allowing the company to maintain low prices and slim profit margins on its goods.

Mixed Reactions From Customers

While some customers are concerned that the new system may slow down entry, others see it as a necessary measure to protect the integrity of Costco’s membership system. Most find the process quick and efficient, especially considering the security benefits it offers.

Costco’s Growth and Profitability

Costco’s membership model has been a cornerstone of its success, driving the company’s rapid growth with its no-frills, warehouse-style shopping experience and discounted prices. The company has not raised its membership fees since 2017, but its decision to do so in 2024 was seen as an effort to balance rising costs.

The company’s strong performance is reflected in its stock price, which has risen 27% so far this year. As of Thursday afternoon, shares were up 3.6% to $839.52. With a market capitalization of over $372 billion, Costco is now the third-largest U.S.-based retailer, behind Amazon ($1.75 trillion) and Walmart ($544 billion), and just ahead of Home Depot, which has a market value of $345 billion.

Conclusion

As Costco continues to expand its reach, the introduction of the new membership scanning system is a strategic move to safeguard its business model and maintain its loyal customer base. While some customers may find the new system slightly inconvenient, the overall response has been positive, as the company works to ensure only paying members benefit from its competitive prices.