Following a rise in card abuse, US-based membership-based warehouse club Costco is taking a firm stance against individuals sneaking into its clubs using other people’s membership cards.

The retailer announced on Tuesday that it is implementing new measures to address this issue and ensure that only legitimate members can access its benefits and pricing.

Increased security measures at checkout

To combat the growing problem of card sharing, Costco has expanded its requirements at checkout.

Previously, the company only asked for membership cards when shoppers checked out at cash registers.

Now, it is also requesting to see membership cards with a photo at self-checkout registers. Additionally, if a shopper’s membership card lacks a picture, they will be asked to present a photo ID for verification purposes.

Protecting member benefits

Costco expressed concern over non-members enjoying the same benefits and pricing as its legitimate members. The company firmly believes that this practice is unfair and undermines the value of membership.

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By GlobalData

By strengthening its enforcement against card sharing, Costco aims to preserve the exclusive advantages that come with being a member of its warehouse club.

Business model relies on membership fees

Unlike other retailers, Costco’s primary source of revenue comes from membership fees. These fees help cover the company’s expenses and enable it to maintain low prices for its members. Costco offers two membership tiers: an annual membership for $60 and a higher-tier plan known as the Executive Membership, which costs $120 per year.

The increased measures against card sharing reflect Costco’s commitment to protecting its members’ interests and upholding its business model’s integrity.

Costco’s crackdown on unauthorised card sharing follows the expansion of self-checkout to more of its stores, which the company believes has contributed to an increase in abuse. The Dallas Morning News previously reported on the retailer’s plans for stricter enforcement.

Membership-based warehouse clubs, including Walmart-owned Sam’s Club, have experienced a surge in business over the past few years. Initially driven by pandemic-related purchases such as toilet paper and hand sanitiser, customers are now drawn to these clubs for affordable fuel and bulk-sized food items during a period of inflation.

Warehouse clubs: success and challenges

While these warehouse clubs have seen success, they have also faced challenges. Consumers, affected by inflation and prioritising experiences like travel and dining out, have reduced their spending on pricier merchandise. As a result, Costco has observed a shift in sales towards food and a decline in demand for items like furniture and electronics.

Despite these challenges, Costco’s net sales for the quarter ending on 7 May showed a year-over-year increase of approximately 2%, totalling $52.6bn when accounting for inflation. Costco chief financial officer Richard Galanti acknowledged the impact of tough times on the business but remained optimistic about the company’s performance.

Shares of Costco have been performing well in the stock market, with a nearly 16% increase since the beginning of the year, outpacing the gains of the broader S&P 500 index. As of Monday’s closing, Costco’s stock was valued at $523.42.