Costco tightens membership controls as social media hacks lead to unauthorized sharing. The impact on businesses and paying customers is costly.
Social media can be used to learn just about anything, too. When it comes to recipes or home renovation tasks, that is definitely a plus. On social media, you can very much find a tutorial for anything you can think of, and that is incredibly useful.
But such supposed “helpful” films can also lead to a lot of issues. When several social media “stars” shared hacks that pose issues for in-store personnel, Starbucks (SBUX – Get Free Report) and Chipotle (CMG – Get Free Report) both had to make improvements to their apps.
In theory, it could be cool to figure out how to order a unique Starbucks drink that isn’t on the menu or get a bigger burrito for less money, but in reality, these “hacks” have drawbacks. Similar to password sharing on streaming websites, it may appear to be a crime without a victim but is nonetheless illegal.
Currently, Costco (COST) – Get Free Report is facing the same challenges as Netflix and other streaming providers.
The warehouse club has been compelled to tighten controls on determining if those making purchases are indeed club members because customers are breaking the chain’s regulations by sharing their membership cards.
Costco Has a Membership Problem
You are stealing from the business when you divulge your streaming password to someone so they can access content without paying. Given the magnitude of streaming goliaths like Netflix (NFLX) and Walt Disney, (DIS) – Get Free Report, that might not sound like a big concern, but for those companies, it’s sort of death by a million cuts.
Because they are “borrowing” an account, a million people choosing not to subscribe to Netflix would cost $15.49 per regular subscription, or almost $15.5 million per month and $186 million annually. With almost $200 million, you can at least purchase a few concerts, proving that password sharing is not an act of crime with no repercussions. It is a costly one for both the business and its paying customers.
When people use the many social media hacks that demonstrate how to share a membership, that is essentially what happens to Costco.
Instead of selling products, the warehouse club makes the majority of its money by selling memberships. Therefore, if people manage to avoid the membership requirement, it immediately affects the business’s bottom line.
Costco Toughens Up Membership Requirements
Costco has increased the amount of time it spends verifying customers are indeed members before letting them check out at some of its warehouse clubs.
“This was at the self checkouts at my local Costco in Livonia, Michigan. Along with a screenshot of a notice outlining the rules, Reddit user Tiduran added, “They also had someone inspecting photographs, on membership cards, before going to the register.
Under the headline, the placard functioned as a kind of courteous reminder. “A Friendly Reminder to Our Members.”
Members must present their membership card to enter any Costco location and to check out at the register. Cards for membership are not transferrable. The only people who can shop are paid members.
A normal Gold Star membership with Costco costs $60, while an Executive membership costs $120 and offers 2% cash back on most purchases up to $1,000.
Chief Financial Officer Richard Galanti stated on the company’s third-quarter results call that membership kept expanding.
“Membership continues to expand. We had 124.7 million cardholders at the end of the third quarter, an increase of almost 7% from the previous quarter, and 69.1 paid household members, he said.
“At third quarter’s end, we had 31.3 million paid Executive members, an increase of 681,000, or 57,000 per week, during the 12-week fiscal third quarter.”
That is consistent with the consistent growth Costco typically reports from quarter to quarter.
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