BUSINESS + ECONOMY

Costco is testing out a new system for entering stores

Jan 17, 2024, 12:00 PM

Costco card...

Anyone with a Costco card can bring up to two guests to the club during each visit, the company stipulates. (Mandatory Credit: Jim Young/Reuters)

(Mandatory Credit: Jim Young/Reuters)

New York (CNN) — Bad news if you’re mooching off of someone else’s Costco membership: The retail giant is cracking down.

When you enter Costco, you need to show your membership card to an employee to shop. Costco membership cards are non-transferable, but the company allows members to give a second household card to one other person in their home. Anyone with a card can bring up to two guests to the club during each visit, the company stipulates.

But Costco has noticed that non-members have been sneaking in with membership cards that don’t belong to them — particularly since Costco expanded self-checkout.

Costco recently started asking for shoppers’ membership cards along with a photo ID at the self-checkout registers, the same policy as regular checkout lanes, to crack down. “We don’t feel it’s right that non-members receive the same benefits and pricing as our members,” Costco said in announcing the change.

And now, Costco is testing out a system that requires members to scan their membership cards at the store entrance — instead of just flashing the card to employees. Shoppers have spotted the new scanners at a store in Washington State and posted photos on Reddit.

Costco finance chief Richard Galanti told CNN that more people have been sharing memberships since the pandemic in 2020.

Costco is testing the scanners at a handful of stores to see if they help. The scanners also mean employees don’t need to ask customers for their membership cards at cash registers and self-checkout.

“It speeds up the process at entry and speeds up the process at the checkout,” he said. “That’s what we believe and we’re going to pilot it.”

It’s the latest example of Costco and other companies like Netflix cracking down on membership sharing.

Costco had around 66 million paid members and 119 million cardholders in 2022, making it one of the largest membership clubs in the world. Costco members pay either $60 a year for a regular membership or $120 for an “executive” card, which includes additional perks.

The membership model is crucial to Costco’s business, which has boomed during the pandemic. Annual fees help boost the company’s profit and offset expenses, helping Costco keep its prices down. Any changes to membership growth or renewal rates could hurt Costco and force it to raise prices.

The retailer made $4.2 billion in membership fees in 2022, a 9% jump from 2021, with its renewal rate sitting high at 93%.

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Costco is testing out a new system for entering stores