The success of Costco’s business model rests on rigor. The wholesaler, which uses a membership system, strictly monitors incoming and outgoing transactions and double-checks customers’ receipts.
But there was a well-known trick for members’ friends and family to take advantage of Costco’s low pricing without paying an annual fee: the self-checkout lanes. Some users found that they could borrow a member’s membership card or QR code through the Costco app, bypassing identification requirements at regular checkouts.
This workaround is coming to an end. The company emailed Wednesday that it had discovered that non-member shoppers were using other people’s membership cards at the self-checkout lanes, which Costco policies say are non-transferable.
“We now ask that you present your membership card with your photo at our self-checkout counters,” the company said, adding, “If there is no photo on the membership card, we will ask for photo identification.”
Costco is popular with consumers for its $1.50 hot dog and soda combo, massive lines of reasonably priced staples, and its signature Kirkland-branded products — everything from linens to liquor. A regular membership is $60 per year and an executive card is $120 per year.
Katie Thomas, who runs the Kearney Consumer Institute, a business consulting firm, said borrowing a friend’s Costco card or QR code was a “not unreasonable trick” for casual shoppers, adding that she believed that this could lead to new paid memberships. Ms. Thomas said she herself was scolded at a Costco recently for using her mother’s membership card, although she said she was also a member.
Costco said in its statement that it “has been able to keep our prices as low as possible because our membership fees help offset our operating costs, which makes our membership fee and structure important to us.”
The retail market has tightened, said Neil Saunders, chief executive of retail consultancy GlobalData, who suggested the reasons for Costco’s action could be increasing pressure on company margins and rising raw material, labor and overhead costs for wholesalers.
“They probably turned a blind eye to it while growth and everything looked rosy,” he said, but is becoming more stern in a tougher economic environment.
Despite struggling with supply shortages and labor shortages during the pandemic, Costco reported strong operating results for 2022 in an annual report and also boasted new items including “BBQ pellets, women’s jeans, reformulated dog food, sauté pans, fresh mini pies and chicken.” . Yakisoba.”
The company also reported that it had nearly 119 million cardholders last year. Revenue from these 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.
“They see the importance of the membership model,” said Mr. Saunders.
The company announced that the membership renewal rate will be around 90 percent worldwide in 2022. Costco hasn’t increased the cost of its membership since 2017, but executives hinted in a recent earnings release that the cost could increase.
Ms Thomas pointed to the clear parallel with Netflix, which announced last month that it would start kicking people off the service if they used someone else’s account elsewhere for more than 30 days, and led the crackdown to changing economic forces and increased competition.
Costco said Wednesday, “We don’t think it’s right for non-members to receive the same benefits and pricing as our members.”