Costco Cracks Down On Membership Card Sharing, Tests New Entry System

In a bid to curb unauthorized access to its stores, retail giant Costco Wholesale Corporation COST is implementing new measures, including a trial of a scanning system at store entrances.

What Happened: Costco is taking action against non-members who have been using membership cards that do not belong to them to gain entry, particularly since the introduction of self-checkout, reported CNN Business.

The company has begun requiring shoppers to present their membership cards and a photo ID at self-checkout registers, similar to the policy at regular checkout lanes.

Costco is now piloting a system that necessitates members to scan their membership cards at the store entrance, rather than simply showing the card to employees. This new system is being tested at a store in Washington State. The company is also testing the scanners at a few other stores to assess their effectiveness.

Richard Galanti, Costco’s finance chief, noted that membership sharing has increased since the onset of the pandemic in 2020. The company is exploring whether the new scanners can help address this issue. The scanners would also streamline the entry and checkout processes, as employees would no longer need to ask for membership cards at the registers.

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Why It Matters: Costco’s membership model is a critical aspect of its business, with annual fees contributing significantly to the company’s profits and helping to keep prices low. Any changes in membership growth or renewal rates could potentially impact Costco’s financials.

The company has been expanding its global presence, with its new store in southern China drawing massive crowds amid the country’s economic slowdown. The firm already has a significant presence in China with five other stores, including one in the financial center of Shanghai.

Meanwhile, analysts have also been bullish on Costco’s long-term prospects, with CNBC’s Jim Cramer recommending it as a great long-term investment. “I know that it can get hit, it has periodically gotten hit, and you have to have room to be able to buy more, that's been the nature of the beast.”

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