Costco's new membership rule could have a major domino effect
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If you’re shopping alone with your partner’s Costco membership card, you probably can’t even enter the store, as Costco now has a stricter policy.
Costco (COST) is tightening entry rules to prevent non-members from sneaking in. The warehouse is rolling out a new system to stop people from using others' membership cards.
"Over the coming months, membership scanning devices will be used at the entrance door of your local warehouse. Once deployed, prior to entering, all members must scan their physical or digital membership card by placing the barcode or QR Code against the scanner," Costco said in a statement in August.
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With stricter enforcement, shoppers must have their own membership or be accompanied by a paying member to gain access.
“I am looking for someone in London with Costco membership to meet me outside the Wembley branch,” Reddit user /YourElfx posted, “I am not interested in anything else. Just the hotdog.”
Related: Costco vs. Sam’s Club: Memberships & product prices compared
But being a Costco member is not just about the $1.50 meal deal. The iconic hotdog and soda combo has become a symbol of value, representing Costco’s commitment to low prices in the face of rising inflation. The company has managed to cut prices on several of its private-label products in recent months.
Holding the line on prices is key to keeping members loyal, making membership retention a vital part of Costco’s success.
Image source: Patrick T. FALLON / AFP) (Photo by PATRICK T. FALLON/AFP via Getty Images
Costco updates trends after membership fee hike
Last month, Costco reported an earnings beat for its fiscal fourth quarter. The company posted earnings of $5.29 per share for the quarter ending Sept. 1, exceeding analysts' expectations of $5.08. However, revenue totaled $79.7 billion, falling short of the $79.9 billion consensus estimate.
Related: Costco makes major change to stop membership sharing
Same-store sales, a critical retailer metric, rose 5.4% year-over-year but missed the projected 5.7% growth. This measure reflects the performance of stores that have been open for over a year.
Membership fees are a major contributor to Costco's profits, and the company uses the income to offset expenses and keep prices low.
In fiscal 2024, Costco's membership fee revenue reached $4.8 billion, accounting for about 65% of the company's net income in the year.
The company raised its membership fees starting Sept.1, its first hike since 2017. However, the new fee structure contributed only a small amount to the increase.