Mega-retailer Costco is asking customers to scan membership IDs to enter one of their warehouses, according to multiple shoppers, a practice that could spread to other locations as the company attempts to prevent non-members from entering outlets.
Reports of Costco beginning membership ID scans at the entrance of their outlets are spreading on Reddit. In a recent post on the platform, one user posted a picture, allegedly taken at Costco’s Issaquah outlet in Washington state, which featured a customer being scanned at the entrance. A notice at the entry stated, “You will be asked to scan your membership card before entering the warehouse.” Business Insider contacted the Reddit user and confirmed the validity of the photo with multiple outlets reporting on the issue.
Costco employees from Texas and California told the outlet they were not doing membership scans at their locations. They pointed out that the Issaquah location is typically where the company tests out any new idea before implementing it in other places.
Another user also said on Reddit that Costco Issaquah is doing entrance scans. “They also got grumpy when my husband (with the card) entered the store a little ahead of me and left me behind with the cart. He was standing right inside waiting for me, but the entrance lady said ‘guests must enter with the card holder,’” the post said.
“Also they didn’t let me sneak through the exit door to get to the bathroom when we were eating lunch. Told me it’s a new rule, you have to go through front … The Costco employees were all kind. They were dealing with the rush of a Sunday at Costco in the New Year, and working with new policies. The scanners worked well and didn’t add any time to getting inside.”
There is speculation that the new scan is part of Costco’s attempt to prevent non-members from gaining access to their stores by using someone else’s membership ID. In June, the company began manually checking for member IDs during the checkout stage.
“Our membership policy states that our membership cards are not transferable and since expanding our self-service checkout, we’ve noticed that non-member shoppers have been using membership cards that do not belong to them,” Costco said on its website.
“As we already ask for the membership card at checkout, we are now asking to see their membership card with their photo at our self-service checkout registers.”
The company pointed out that Costco is able to keep its prices as low as possible since the membership fees it collects “help offset our operational expenses.” This makes the membership fee and structure “important to us.”
Costco Membership
In a filing with the U.S. Securities and Exchange Commission (SEC) back in May, Costco said that “the membership format is an integral part of our business and has a significant effect on our profitability.”“This format is designed to reinforce member loyalty and provide continuing fee revenue. The extent to which we achieve growth in our membership base, increase the penetration of our Executive members,”
In fiscal year 2023, which ended on Sept. 3, Costco registered a net income of $6.29 billion. Membership fees contributed $4.58 billion to the company.
According to an analysis by Business Insider, Costco’s gross margins or average merchandise markup in 2022 was just around 10.5 percent, which it pointed out was far less than the 25–50 percent that is common for other businesses selling the same items.
As such, Costco differs from its peers like Walmart or Target which make the majority of their profits through sales since much of Costco’s profit comes from their membership fees. This makes preventing non-members from using the ID cards of members crucial for Costco.
In an interview with The Wall Street Journal last June, Costco Chief Financial Officer Richard Galanti said that the issue of the rising number of non-members making transactions came up at their meeting a few months earlier.
“It’s a really small percent of members who are doing it … But when you’re dealing with millions of transactions, even a very small percentage is something you would want to correct,” he said.
Costco offers three membership options: Gold Star, Business, and Executive. Both Gold Star and Business memberships cost $60 annually while the Executive membership costs double at $120.
The Business membership provides extra benefits like the ability to add affiliate cardholders for an extra $60. Executive membership provides an annual 2 percent reward, additional benefits and greater savings on Costco Services, and extra benefits on certain Costco Travel products.
While Costco’s ID scan at the entrance may be novel in the United States, people from other countries have reported that the company’s outlets in their regions already practice it.
“Birmingham Costco been doing it for years, and I assumed it was normal everywhere,” one Reddit user said while commenting on the post discussing the Issaquah store’s entrance checks. Birmingham is located in the United Kingdom.
Another user said that the procedure was already in place in New Zealand since “the store was opened” at their place. “I’m guessing it’s working well for them internationally so they’re bringing it back to the USA.”
Costco has been “doing this at least in Iceland and Australia since inception. I’ve always had to scan in and out. Was surprised its even a topic … just assumed that was normal,” said a third user.
