Costco tightens rules: ID required at all registers, including self-checkout. Non-members exploiting reduced rates via self-checkout workaround.
On Wednesday, the wholesale retailer said that it would begin requiring identification at all registers, including self-checkout lanes.
Costco’s business model is built on strictness. The wholesaler, which operates on a membership basis, keeps a close eye on customers coming in and going out, and always verifies their purchases.
However, there was a widely known workaround that allowed non-members to take advantage of Costco’s reduced rates (without paying the yearly fee): the self-checkout lanes. Some customers discovered they could use someone else’s membership card or a QR code from the Costco app to bypass the identification checkpoints at standard checkout.
That temporary fix is going away. On Wednesday, the business issued an email statement saying that it had discovered customers using membership cards that did not belong to them at the self-checkout counters.
Specifically, the corporation stated, “We are now asking to see their membership card with their photo at our self-service checkout registers,” and “If their membership card does not have a photo, then we ask for a photo ID.”
Customers adore Costco because of its trademark Kirkland brand products, which include everything from linens to whiskey, and its signature $1.50 hot dog and Coke combo. The annual fee for a basic membership is $60, while the fee for an executive card is $120.
Management consultant Katie Thomas, who heads the Kearney Consumer Institute, deemed it a “not unreasonable hack” for infrequent consumers to use a friend’s Costco card or QR code, and she speculated that this practice could lead to new paid memberships. Even though Ms. Thomas is a member of Costco, she was recently reprimanded for using her mother’s membership card.
In a response, Costco explained that its “membership fees help offset our operational expenses, making our membership fee and structure important to us” in order to maintain low prices.
According to Neil Saunders, managing director of retail consulting firm GlobalData, increased costs of commodities, labor, and overhead for wholesalers may be contributing factors in Costco’s decision to crack down.
He speculated, “They probably turned a blind eye to it whilst growth and everything was looking rosy,” but now that times are tougher, they are becoming more stringent.
Despite supply limits and labor shortages caused by the epidemic, Costco announced solid operating performance for 2022 in its annual report, which also touted the introduction of new products such “BBQ pellets, women’s jeans, reformulated dog food, sauté pans, fresh mini cakes, and chicken yakisoba.”
Nearly 119 million cardholders were recorded by the corporation in the previous year. This membership fee income increased by 9% from $201 to $202 to a total of $4.2 billion in 2022. Costco recorded a net income of $5.8 billion in 2018, up from $5 billion the year before.
Mr. Saunders remarked, “You see the importance of the membership model.”
According to the firm, the global membership renewal rate in 2022 was close to 90%. Costco has not increased membership fees since 2017, but in a recent earnings call, executives hinted that this could change.
Ms. Thomas drew a parallel to Netflix, which just last month announced it would start terminating accounts of people who had used the service from a different location for more than 30 days. Netflix blamed the crackdown on changing economic forces and increased competition.
On Wednesday, Costco said, “We don’t feel it’s right that nonmembers receive the same benefits and pricing as our members.”
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