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Costco is testing a new store entry system

Costco is testing a new store entry system

(CNN) — We've got bad news if you're using someone else's Costco membership to get into stores: The retail giant has begun taking steps to prevent that.

When you enter Costco, you must show an employee your membership card so they can make a purchase. Costco membership cards are non-transferable, but the company allows members to give a second card to someone in their household. The company states that a person with a card can bring up to two guests during each visit.

But Costco has found that people without memberships are entering stores with cards that don't belong to them, especially since Costco expanded self-checkout.

The company recently began requiring shoppers to present their membership cards as well as photo ID at self-checkout registers, the same policy it has with regular checkout registers. “We do not believe it is right for non-members to receive the same benefits and prices as our members,” Costco said in announcing the change.

In addition, Costco has now piloted a system that requires members to scan their membership cards at the store entrance, rather than simply showing the card to employees. Some customers spotted the new scanners at a store in Washington state and posted photos on Reddit.

Costco CFO Richard Galanti told CNN that more people are sharing their memberships since the 2020 pandemic.

Costco is testing the scanners in several stores to see if they are useful. The scanners will also prevent employees from having to ask customers for their membership cards at registers and at self-checkout.

“It speeds up the check-in process and speeds up the check-out process,” Galanti explained. “We believe in it and we will put it to the test.”

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This is the latest example of how Costco and other companies like Netflix are taking steps to prevent membership sharing.

Costco had about 66 million paid members and 119 million cardholders in 2022, making it one of the largest membership clubs in the world. Costco members pay $60 annually for a regular membership or $120 for an “executive” card, which includes additional benefits.

The membership model is critical to Costco's business, which has thrived during the pandemic. Annual fees help increase a company's profits and offset expenses, which in turn allows it to keep its prices low. Any changes in membership growth or renewal rates could hurt Costco and force it to raise prices.

The retailer earned $4.2 billion in membership fees in 2022, an increase of 9% from 2021, with a high renewal rate of 93%.