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The Street
The Street
Charley Blaine

Costco makes major change to stop membership sharing

It is something all Costco customers know: To enter a store you must show your membership card to a staffer waiting at the door. 

Likewise, to get into the self-checkout line, you have to present your card to a staffer, who will also want to see your picture on the back of the card. 

Costco COST will soon be requiring customers to scan their cards at the entrances to its stores. The company operates 882 stores worldwide, including 611 in the U.S. and Puerto Rico and 108 in Canada. 

Related: Costco and Walmart are pushed into an impossible political choice

The barcodes of membership cards or the QR code on your phone will have to be pressed against the scanner for you to get entry. A nonmember must be accompanied by a member to get in. A staffer will still greet customers at the store entrance.

If your card has expired or you are not yet a Costco member, you will be directed to a membership desk to renew or sign up.

Costco first started to test an electronic scanning entry system in January at a few stores. 

Customers shop at a Costco store in Teterboro, N.J. 

Bloomberg/Getty Images

Costco fights back against fraud

Retailers have been trying to cut down on theft or, in Costco's case, trying to stop nonmembers from gaming the membership card system to take advantage of Costco's low pricing.

Often, gaming the system includes using someone else's card, a form of membership-sharing that's not allowed.

Costco charges an annual membership fee to shop in its stores. It's $60 a year for regular Gold Star members in the U.S. and Canada until Sept. 1, when it rises 8% to $65.

Its Executive Card membership fee will rise 8.3% to $130 from $120, also on Sept. 1. The Executive Card membership qualifies customers for a 2% reward. The maximum yearly reward will rise from $1,000 now to $1,250. 

Until its early-July decision to raise membership fees, the Issaquah, Wash., company had not increased its membership fees since 2017.

The decision produced mixed feelings among Costco customers. Some worry that it will take longer to enter, inconveniencing them. 

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Others say the process is quick and easy, and necessary given how many people try to shop at Costco without an active membership.

View the original article to see embedded media.

Memberships are Costco's secret sauce

The membership fees contribute greatly to profits, enabling Costco to maintain thin profit margins on goods and services.

Costco has grown rapidly with its stripped-down warehouse-style presentation and discounted prices. 

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The company's shares are up 27% this year and were up 3.6% to $839.52 Thursday afternoon. The S&P 500 and Nasdaq Composite are up a bit more than 11% this year.

The company now sports a market capitalization of more than $372 billion, third-largest among U.S.-based retailers, after Amazon.com  (AMZN)  ($1.75 trillion) and Walmart  (WMT)  ($544 billion). Home Depot  (HD)  is fourth at $345 billion. 

Related: Veteran fund manager sees world of pain coming for stocks

 

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