Costco cracks down Self-Checkout Lanes, the popular wholesale retailer known for its low prices and bulk goods, is putting an end to a well-known loophole that allowed nonmembers to enjoy its discounts without paying the annual membership fee. The workaround involved using a member’s card or QR code at the self-checkout lanes, bypassing the identification requirements of regular checkout lanes. However, Costco recently announced that it will be implementing stricter measures to ensure that only valid members can access these benefits.
After Costco cracks down Self-Checkout Lanes, In a released statement on Wednesday, Costco stated that it had observed nonmember shoppers utilizing other people’s membership cards at the self-checkout lanes, which is against their policy as membership cards are non-transferable. The company will now require individuals using self-checkout registers to present a membership card with a corresponding photo to address this issue. If the card lacks a photo, a photo ID will be requested.
Costco’s business model, heavily reliant on its membership system, has contributed to its success. The retailer’s $1.50 hot dog-and-soda combo, a wide range of affordable bulk products, and exclusive Kirkland brand have endeared it to consumers. A regular membership costs $60 per year, while an executive card is priced at $120 annually.
Potential for New Paid Members
Katie Thomas, the Kearney Consumer Institute leader, acknowledged that borrowing a friend’s membership card or QR code was a reasonable strategy for occasional shoppers. She even suggested that it could potentially lead to new paid memberships. Thomas shared her own experience of being reprimanded at a Costco store for using her mother’s membership card, despite being a member herself.
In its statement, Costco emphasized the importance of membership fees in enabling the company to maintain its low prices and offset operational expenses. Neil Saunders, managing director at retail consulting firm GlobalData, speculated that the Costco cracks down might be driven by mounting pressures on corporate margins and increasing costs related to commodities, labor, and overhead for wholesalers.
Despite challenges such as supply constraints and labor shortages during the pandemic, Costco reported strong operating results for 2022. The company boasted about new offerings in its annual report, including BBQ pellets, women’s jeans, reformulated dog food, sauté pans, fresh mini cakes, and chicken yakisoba. Costco had nearly 119 million cardholders in 2022, generating $4.2 billion in revenue from membership fees, a 9 percent increase from the previous year. Net income for the company reached $5.8 billion in 2022, up from $5 billion in 2021.
Costco’s membership renewal rate stood at approximately 90 percent worldwide in 2022, underscoring the significance of the membership model. Although the company has not raised membership costs since 2017, executives hinted at a potential increase in a recent earnings call.
Costco cracks down Similar to Netflix
Drawing a parallel to Netflix, which recently cracked down on account sharing due to economic shifts and heightened competition, Katie Thomas highlighted the similar motives behind Costco’s actions. Costco firmly believes that nonmembers should not receive the same benefits and pricing as its dedicated members.
As Costco tightens its policies, it remains to be seen how this move will affect the retailer’s bottom line and whether it will lead to an uptick in new memberships. One thing is certain: the days of scoring Costco’s low prices without paying the membership fee through the self-checkout lanes are coming to an end.