Costco Cracks Down on Membership Card Sharing, Aims for Increased Signups

Following in the footsteps of Netflix, which recently began clamping down on password sharing, wholesale retail giant Costco has initiated its own crackdown on shoppers who borrow membership cards to access its stores and enjoy discounted prices. Costco, known for its requirement of an annual membership fee starting at $60, has implemented measures to prevent non-members from availing themselves of member benefits.

Previously, shoppers could borrow a friend or family member’s membership card and conveniently use self-checkout aisles to complete their purchases. However, Costco has taken notice of this practice and aims to enforce its long-standing policy that membership cards are non-transferable.

In a statement, Costco emphasized its stance on membership card sharing, stating, “We don’t feel it’s right that nonmembers receive the same benefits and pricing as our members.” To combat this, the retailer will now require shoppers using self-checkout registers to present their membership card to a store associate. Additionally, if the membership card lacks a photo, shoppers will be asked to show a secondary photo ID that matches the name on the card.

The decision to better enforce its membership policy could potentially lead to an increase in signups for individuals who have been borrowing cards to enjoy the benefits of shopping at Costco. Increased membership numbers directly contribute to the company’s profits as the annual membership fee is a significant revenue driver.

Arun Sundaram, CFRA Research senior equity analyst, highlighted the importance of Costco’s membership revenue, explaining, “Costco derives most of its operating profits from membership revenue rather than the sale of merchandise and services.” Sundaram noted that the strategic move to crack down on membership sharing could positively impact the company’s bottom line by generating incremental membership growth.

While Costco has not raised its membership prices since June 2017, Sundaram anticipates a potential increase towards the end of this year or in the first half of 2024. Despite this, the recent crackdown has been well-received on Wall Street, with the company’s stock rising approximately 2% since the policy change was announced.

As Costco aims to safeguard the exclusivity of member benefits, the implementation of stricter measures reflects its commitment to maintaining a fair and equitable shopping experience for its members. The renewed emphasis on membership policies is expected to drive increased signups, bolstering the company’s already strong membership revenue and further solidifying its position as a leading wholesale retailer.