Costco makes major change to stop membership sharing

Costco will soon implement a new policy requiring customers to scan their membership cards at the entrances of its stores. The company currently operates 882 locations around the world, with 611 in the U.S. and Puerto Rico and 108 in Canada.

To gain entry, you'll need to scan either the barcode on your membership card or the QR code on your phone against the scanner. Nonmembers must be accompanied by a member to enter. A staff member will still be present to greet customers at the entrance.
If your card has expired or if you're not yet a member, you'll be directed to a membership desk to renew or sign up. Costco began testing this electronic scanning entry system in a few stores starting in January.

New measure to stop membership sharing

Over a year has passed since Costco announced it would more rigorously enforce its membership-sharing policies and crack down on those trying to bypass entry rules. In June 2023, Costco informed CNBC that stores were beginning to request photo ID at self-checkout registers. If a membership card lacks a photo, customers would be required to present a photo ID.

Now, in a statement on its website, the wholesaler announced it will be implementing another measure to prevent unauthorized access to its stores.

“Over the coming months, membership scanning devices will be used at the entrance door of your local warehouse,” the statement reads, in part. “Once deployed, all members must scan their physical or digital membership card before entering.”

The new entry system will require all members to use the barcode or QR code associated with their membership to gain entry. All guests will need to enter with a member whose subscription is active and up to date. The statement also noted that members should be prepared to provide proof of membership with a valid photo ID.

Change of an annual membership fee

Retailers have been working to reduce theft, and in Costco's case, to prevent nonmembers from exploiting the membership card system to access their low prices.

Often, exploiting the system involves using someone else's membership card, which constitutes unauthorized membership-sharing. Costco requires an annual membership fee to shop at its stores. Currently, the fee is $60 per year for regular Gold Star members in the U.S. and Canada. Starting September 1, this fee will increase by 8% to $65.

The fee for the Executive Card membership will also rise by 8.3%, from $120 to $130, effective September 1. This membership offers a 2% reward, with the maximum annual reward increasing from $1,000 to $1,250.
Before its decision in early July to raise membership fees, Costco, based in Issaquah, Wash., had not increased its membership fees since 2017.

Costco’s stock

Costco has historically registered consistently robust financial performance. Between fiscal 2013 and fiscal 2023 (ended Sept. 3 last year), Costco saw its net sales and diluted earnings per share rise at compound annual rates of 8.7% and 11.8%, respectively. There was not a single year during that stretch that the top line decreased, which is an impressive feat.

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.

The company's strong profitability benefits shareholders. Management issues one-time special dividends, the latest being $15 per share last December.

Costco possesses a wide economic moat that protects its competitive position in an extremely cutthroat industry. Scale is perhaps the single most important factor contributing to the company's dominance.

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