Costco knows you’re using your friend’s membership card. To save you the embarrassment of telling you off when you’re in the checkout line, now Costco will try to catch membership moochers before they even get in the door. The retailer is implementing stricter policies and cracking down on non-members using other people’s cards by requiring shoppers to scan their membership cards to enter stores.
“Over the coming months, membership scanning devices will be used at the entrance door of your local warehouse,” Costco said in a statement online . “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.” Customers walk by the membership counter at a Costco store on July 11, 2024 in Richmond, California.
For members with cards that don’t have a photo, Costco says to come prepared with a valid photo ID but encourages shoppers to visit the membership counter and have their photo taken. Costco’s new rule also requires guests to be accompanied by a valid cardholder to enter its stores, making it more difficult for non-members to sneak in using cards that don’t belong to them. Costco did not immediately respond to a request for comment.
The move comes as an extension of the system Costco tested out at some stores earlier this year, which required members to scan their cards at machines placed near the store entrance – instead of just flashing a card to employees. Self-checkout machines were also affected by Costco’s crackdown. Last year, the company began requiring shoppers to present their membership card and a photo ID to use the registers.
“We don’t feel it’s right that nonmembers receive the same benefits and pricing as our members,” Costco said in a statement last year. Costco’s crackdown on non-members comes after the company announced last month that it was raising its membership fees by $5 to $65 in the U.S.
and Canada – the first time since 2017. The change goes into effect on Sept. 1.
The bulk of Costco’s profits come from annual fees. It reported last year that it earned $4.6 billion in revenue from membership fees, an 8% increase from 2022.
___ It is a tough time to be in the retail business. Inflation has taken its toll on consumers' wallets in the past few years, and although prices are no longer rising as quickly as they did in 2022, they still are up by around 20% compared to the start of 2020. These price increases have caused consumers to find more ways to save money.
Discount stores were the hottest segment of the retail sector in 2023 and spending at discount retailers grew by 26%, according to Deloitte research. In contrast, spending at department stores fell by nearly 20%. This in turn has put pressure on retailers, whose margins are already thin.
Task Group analyzed survey data from Deloitte to see how retailers plan to face these challenges. The Deloitte survey asked 50 senior executives from retail companies what they thought the biggest growth opportunities were for them in 2024. The most common response from the executives involved brand loyalty programs, such as those offering consumers points every time they make a purchase.
Just over half of executives surveyed believed strengthening such programs would be a key area of potential. Customer rewards programs are nothing new. Such loyalty incentives have existed since at least 1793, according to a 1971 New York Times report , which reported a merchant in "Sudbury, [New Hampshire]" giving customers copper tokens they could redeem for merchandise in the future.
" Trading stamps " were popularized by the Sperry and Hutchinson Company in 1896. The company provided these stamps to retailers in New England, who then gave them to customers. Once they had filled their books, customers could redeem their stamps for goods from Sperry and Hutchinson.
Loyalty programs have come a long way since. Reward stamps are now rare, having been mostly replaced by digital accounts, with mobile apps playing a big role. This has created many opportunities for retailers, including the chance to create personalized shopping experiences for their customers by using data analysis to determine what kinds of rewards would work best for them.
The Deloitte report notes that Ulta Beauty grew its active loyalty program members from 30.7 million in the 2020 fiscal year to 40.2 million in 2022.
This proved crucial, as over 94% of its sales came from such consumers. The Deloitte report notes that digital rewards programs also give retailers a source of valuable data on their customers. When Apple launched stricter privacy rules on iOS in 2021, it hampered traditional media networks' ability to track consumers.
This created an opportunity for retailers wanting to sell their customers' data to advertisers, though it raised questions about privacy. Around 2 in 3 American consumers already belong to somewhere between 1 in 5 loyalty programs. Deloitte estimates most consumers use half or even fewer of their memberships.
The challenge many retailers face is not signing up consumers but rather creating benefits and shopping experiences attractive enough for their existing consumers to use the memberships and stick around. One potential source of silver lining is that customers are not solely focused on price. A different study, conducted by PwC , asked both company executives and consumers what they thought caused consumers to leave a company.
Some 37% of executives surveyed said they believed customers left following price increases or the cessation of discounts. Yet only 17% of consumers polled agreed. Consumers were more than twice as likely to say a bad experience with their products or services would make them leave a brand.
In a time of prolonged inflation, companies might not have much more room to adjust their prices. This suggests companies can do well by focusing on quality over making painful decisions about prices. Story editing by Mary Reardon.
Copy editing by Paris Close. This story originally appeared on Task Group and was produced and distributed in partnership with Stacker Studio. CNN’s Elisabeth Buchwald, Samantha Delouya and Nathaniel Meyersohn contributed reporting.
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