Costco cracks down on membership sharing
The success of Costco’s business model rests on rigor. The wholesaler, using a membership system, strictly monitors entries and exits and checks customer receipts.
But for members’ friends and relatives, there was a well-known hack for scoring Costco’s low prices without paying an annual fee: the self-checkout lines. Some users found they could borrow a member card or a member’s QR code from the Costco app and bypass regular checkout identification requirements.
This temporary solution is coming to an end. The company said in an emailed statement Wednesday that it had noticed non-members using other people’s membership cards, which are non-transferable under Costco policy, in the self-checkout lanes.
“We are now asking to see their membership card with their photo at our self-service checkouts,” the company explained, adding, “If their membership card doesn’t have a photo, we’ll ask for photo ID.”
Costco is beloved by consumers for its $1.50 hot dog-and-soda combo, towering lines of cheap bulk goods, and its signature Kirkland branded products — everything from linens to liquor. A regular membership costs $60 per year and an executive card costs $120 per year.
Katie Thomas, who heads the Kearney Consumer Institute, a management consultancy, said it was a “not unreasonable hack” for casual shoppers to borrow a friend’s Costco card or QR code, adding she thought this could lead to new paid memberships. Ms. Thomas said she herself was recently berated at a Costco for using her mother’s membership card, even though she said she was also a member.
Costco said in its statement that it “was able to keep our prices as low as possible because our membership fees help offset our operating costs, making our membership fees and structure important to us.”
The retail market has tightened, said Neil Saunders, general manager of retail consultancy GlobalData, who suspected reasons for the crackdown at Costco could be mounting pressure on operating margins and rising raw material, labor and eavesdropping costs for wholesalers.
“They probably turned a blind eye while growth and everything looked rosy,” he said, but are tightening in a tougher economic environment.
While Costco faced supply constraints and labor shortages during the pandemic, it reported strong operational results for 2022 in an annual report that also boasted of new items including “BBQ pellets, women’s jeans, reformulated dog food, sauté pans, fresh mini cakes and chicken yakisoba.”
The company also reported that it had nearly 119 million cardholders last year. Revenue from those membership fees totaled $4.2 billion in 2022, up 9 percent from 2021. Costco’s net income was $5.8 billion last year, the company reported, up from $5. billion in 2021.
“You see the importance of the membership model,” Mr Saunders said.
Member renewal rates will be around 90 percent globally by 2022, the company said. Costco hasn’t increased the cost of its membership since 2017, but executives indicated in a recent earnings call that costs could rise.
Ms Thomas pointed to the obvious parallel with Netflix, which announced last month that it would start kicking people off the service if they used someone’s account for more than 30 days while they were in another location. competition.
Costco said Wednesday: “We don’t think it’s right that non-members get the same benefits and prices as our members..”