Costco cracks on membership sharing with new scanners

Costco (COST) is cracking down on membership sharing by using scanning devices at the entrances of its stores. Catalysts Co-hosts Seana Smith and Madison Mills break down the move and whether it will affect membership numbers.

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This post was written by Melanie Riehl

Video Transcript

Turning to a trending story here today, Costco, it's cracking down.

And before you head to the store, you'll want to make sure you have your membership card with you.

The retail giant is installing membership scanning devices at the entrance of stores.

So shoppers will have to verify that they are members before entering.

It's not doing much for the stock, at least in terms of any concern.

Maybe people wouldn't be shopping there as frequently.

There'd be maybe some of a push back shares are actually moving to the upside today.

So maybe this is a sign that hey, people are too frustrated with this update.

But again, this is a trending story here, Mattie at Yahoo Finance and I bring this up one just because of the popularity of Costco two because so many people are more on the hunt for deals for value something similar.

We were just talking to Berkeley's retail analyst, Adrian Yee about moments ago and, and, and, and I also wonder what this is going to do to membership numbers if it cracks down like this is ultimately going to boost membership numbers at a time when Costco is really its membership prices slightly.

It's such a great point, Shana.

But also I'm fascinated in Costco as the latest company to come out against free loaders.

Essentially.

I have certainly been guilty of joining a friend to get into Costco and you can still do that so long as your friend has their past and they badge in.

That was the first thing that I checked in terms of the me of it all impact of this particular story.

But it kind of reminds me of the price hikes and the password crackdowns, uh password sharing crackdown rather that we are seeing from some of the streamers.

Uh Netflix came to mind for me, for example, when this story came up, it seems like as we continue to see companies having to find uh kind of creative ways to increase their pricing power to up their margins every quarter after quarter.

The thing that they're turning to is cracking down on some of the free loading activity that we are seeing in particular with Costco, Costco.

I also think that part that is the ability for consumers who may find a card that's been used by someone else.

Perhaps there's some stealing involved with that.

They do note that in particular they are wanting to make sure that each customer coming through the door has a card that matches their identification.

That's why you'll have to have a photo ID with you for that.

But I find it to be a fascinating trend that we're seeing across several companies here.

It certainly is.

And, and, and if you're asking me why this could be a catalyst for the stock, remember that the bulk of profits come from their annual fee.

So this is why this is so critical and something that the street closely washes and also why, what was it just a few weeks ago, maybe a month or two ago at this point?

It's hard to keep track.

But Costco recently raised, I believe is the last earnings report raising the, uh, membership fee by five bucks to $65 in the US and Canada, it was the first time they did that since 2017 and that is set to go into effect on September 1st.