Costco’s change to membership rules is controversial – but its solving a big problem in the parking lot
Costco has announced that a major change in the way its members shop will be a boon to its profitability.
The wholesaler came up with a plan in early 2024 to tackle customer sharing of membership cards by having them scanned immediately upon entry.
Ron Vachris, who became CEO on Jan. 1, told investors that the idea of scanning membership cards at the door has made Costco stores even more efficient. It now plans to roll it out more broadly.
“We’re testing some scanners at the front door,” he said during the third-quarter earnings call in May. “They’ll speed up our registrations significantly once we have all the scans and memberships verified at the front door.”
Faster service at the cash registers has a positive effect on increasing grip for members. It frees up space in the normally overcrowded parking lots.
This new technology displays a photo of the cardholder on a screen, which the employee at the entrance can compare with the person in front of him.
With its new move to verify that customers are actually members, Costco appears to be taking a page out of Netflix’s book
The photo shows the setup at the entrance to the Costco warehouse in Issaquah, Washington, that allows a store associate to view the photo associated with a membership card.
Costco appears to be taking a cue from Netflix, which in early 2023 began cracking down on people sharing their account passwords with loved ones and friends.
The decision gave Netflix 9.3 million new customers, bringing its total subscriber count to nearly 270 million.
It’s not yet clear when these machines will be rolled out more broadly to the more than 600 Costco locations in the U.S., but a handful of stores in Washington state are already using them.
Users on Reddit already commented on this new direction when it was first tested earlier this year, and they were very positive about it.
Someone noted that most gyms make their members scan their ID at the entrance before they enter. “It’s funny that people are mad that Costco is doing the same thing.”
Another wrote: ‘I don’t really understand the problem. A machine that scans the membership card is not really any different from a person you show the card to. It might be more efficient.’
While members will no longer be able to send their son or daughter to Costco using their card under this new system, Vachris says it will ultimately significantly improve the overall customer experience.
By partially automating the customer verification process, parking spaces are released much faster and also “more gas can be supplied where needed,” Vachris said.
Hundreds of people went to Reddit last year to complain about the parking lots at their local Costcos, which many described as “a Mad Max situation,” even in the best of times.
Others lamented that the long lines at the gas pumps, often located right near the entrance to the parking lot, made maneuvering even more difficult.
“Costco does a lot of things right, but parking isn’t one of them,” one person wrote.
Pictured: A crowded parking lot at a Costco store in Richmond, California
Long lines for gas sometimes exacerbate the problem of maneuverability in Costco parking lots
Costco CFO Gary Millerchip said in May that the ability to buy products online and pick them up in store will “expand” over time. Currently, members can only do this with tech items and jewelry
During the May call, Costco CFO Gary Millerchip also indicated that the ability to buy products online and pick them up in store is “expanding.”
Currently, members can only do this with tech products that are in stock, such as iPads, laptops and various types of jewelry.
“We can’t expand into every category, but we are expanding into televisions and other electronic items right now,” Millerchip said. “We see that as a real opportunity for us.”
Millerchip also advertised a recently closed deal with Uber which will now enable customers in 17 US states to order food from Costco via Uber Eats.
Despite third-quarter revenue of $58.52 billion, Costco announced in July that it would increase membership fees starting in September.
It’s the first increase since June 2017. The standard membership will increase by $5 per year, from $60 to $65 per year.