BIG UPDATE: Costco makes major change to stop membership sharing
According to The Street, Costco is taking new steps to ensure that only paying members can access its stores. All customers are familiar with the standard practice of showing their membership card to an employee at the entrance. Now, the wholesale giant is introducing a new system to prevent non-members from gaming the system and taking advantage of Costco’s low prices.
Costco Introduces Electronic Scanning at Entrances
Starting soon, Costco will require members to scan their membership cards at store entrances. The company, which operates 882 stores worldwide, including 611 in the U.S. and Puerto Rico, began testing this system in January at select locations. Customers will need to scan the barcode on their physical membership card or a QR code on their phone to enter. Non-members must be accompanied by a member.
If a customer’s membership has expired, they will be directed to the membership desk to renew or sign up. Although scanning will be required, Costco staffers will still greet customers at the entrance.
Fighting Fraud and Membership Sharing
Costco is implementing these changes as part of an effort to combat membership sharing, a common form of fraud where people use someone else’s membership to shop at the store. The company, which charges an annual membership fee, aims to protect the value of its memberships by ensuring only paying members can take advantage of its low prices.
The basic Gold Star membership fee in the U.S. and Canada recently increased by 8%, from $60 to $65 as of September 1, 2024. The Executive Membership, which offers a 2% annual reward, also saw an increase from $120 to $130, with the maximum yearly reward rising from $1,000 to $1,250.
Mixed Reactions from Costco Customers
The decision to enforce stricter entry rules has elicited mixed reactions. Some customers worry that the new system will cause delays, making it harder to enter the store. Others find the process quick and necessary to prevent non-members from shopping without paying the annual fee.
Membership Fees Drive Costco’s Success
Costco’s business model relies heavily on its membership fees, which contribute significantly to the company’s profits. By maintaining thin profit margins on goods and services, the company can offer lower prices, making its memberships a valuable asset to shoppers.
With a no-frills, warehouse-style approach, Costco has grown rapidly. Its shares are up 27% this year, with a market capitalization exceeding $372 billion, making it the third-largest U.S.-based retailer after Amazon and Walmart.