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July 18, 2024

Costco Begins Pilot Testing Membership Card Scanners at Store Entrances

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Jan 17, 2024

Costco, the second largest retailer in the world behind Walmart, has started pilot testing membership card scanners at the entrance of some stores in the United States. This move aims to cut down on non-members taking advantage of Costco’s discounts and products by entering stores accompanying cardholders.

Background

Costco’s discount warehouse model relies on paid memberships for a majority of its profits. However, the retailer has struggled with non-members accessing Costco warehouses by entering with cardholding friends or family members. This costs Costco significant amounts in lost membership revenue.

Up until now, Costco has checked memberships at the checkout by requiring members to show their membership cards when making purchases. But this allows non-members to shop in warehouses, benefiting from prices 20-30% cheaper than traditional retailers.

Costco currently has over 63 million paid household members globally. But it is estimated 10-20% of customers entering warehouses are non-members that have not paid the $60-$120 annual fee.

New Membership Card Scanners

To combat this issue, Costco has started testing digital scanners mounted at the entrance of some warehouses that will require shoppers to scan membership cards upon entering stores.

Reports of tests have emerged from locations in New York, Tennessee, Illinois and North Carolina. But Costco has not officially commented on locations or a wider rollout.

Based on customer reports shared on social media sites like Reddit, the club retailer is trialing both scan stations that allow entrance after scanning as well as systems that print expiration stickers.

How the Scanners Work

The membership card scanners being tested are mounted on poles positioned at store vestibules. Shoppers must scan their membership card barcode before the doors will open to allow entry.

For members without cards on them, a Costco employee can manually enter the membership number at the scanner. And the retailer will still allow non-members to enter if accompanied by a cardholder.

In addition to stand alone scanners, other locations have implemented systems that print a same-day expiration sticker after scanning. This sticker must be shown to exit the warehouse.

Mixed Response So Far

Response has been mixed amongst shoppers at the Costco locations currently testing these new systems.

Some loyal members have praised the move as long overdue to stop non-member “moochers” benefiting from Costco’s member savings and perks. Especially amid rising costs across all retail sectors, members feel more crackdown is justified to protect their $60+ investments.

However, other members have voiced frustrations with potential longer lines and hassles scanning cards. Especially at busy warehouse exits like food courts and gas stations, the requirement to scan again to exit may cause congestion issues in the trials.

Quotes from Customers

“This is great! I’m tired of my cheap brother-in-law asking me to buy him gift cards while he shops with me,” said Tom D., Costco member in Rochester, NY. “He’s been getting a free ride off my membership for years.”

“Costco already checks memberships at checkout when I purchase stuff. This just seems like it will create longer lines coming in and out,” said Sally P., Costco member in Nashville, TN.

Expected Impact and What’s Next

If rolled out wider across all 550+ US warehouses, analysts expect these entrance scanners will bring in tens of millions in added membership revenue. But balancing convenience and efficiency will require testing and optimization.

Costco CFO Richard Galanti suggested the ongoing trials will evaluate efficacy before determining wider implementation. The company wants to minimize disruption especially during the busy holiday periods.

Continued member frustration may push-back broader rollouts to more stores. And flow of shopper traffic will need to be assessed, especially any exit clogs while lining up to scan again before leaving.

But if scans at entry help better tie shopping directly to membership holders, the systems seem primed to expand. Especially with mounting downward fiscal pressure as a possible recession looms in 2024/2025.

Potential Future Scanner Applications

Beyond controlling access, linking purchases directly with member IDs could open up a slew of customer data opportunities to personalize offers and modernizing loyalty programs. Costco has been slow to digitize and collect member shopping behavior relative to key rivals like Amazon or even Sam’s Club.

Required member scans during entry and exit could give Costco new ability to:

  • Track member shopping habits
  • Offer personalized e-commerce recommendations
  • Target timely promotions based on purchase histories
  • Develop a modernized digital loyalty program

While no indications exist yet that Costco plans to mine data or develop personalized promotions from these scans, the possibility remains open long term. Marks a major potential shift for a company that has relied on word-of-mouth praise over individualized marketing and sales outreach.

Conclusion

With penetration rates stagnating domestically and abroad, testing mandatory membership card scanners at entries aims to help Costco protect its subscription fee profits in a tightening economy. Added convenience incentives like digitally personalized offers could turn these pilots into a long-term advantage beyond just stopping “membership mooching”.

But organized implementation that avoids disruption especially during peak hours will be critical ifReception has been mixed amongst shoppers at the Costco locations currently testing these new systems.

Some loyal members have praised the move as long overdue to stop non-member “moochers” benefiting from Costco’s member savings and perks. Especially amid rising costs across all retail sectors, members feel more crackdown is justified to protect their $60+ investments.

However, other members have voiced frustrations with potential longer lines and hassles scanning cards. Especially at busy warehouse exits like food courts and gas stations, the requirement to scan again to exit may cause congestion issues in the trials.

If rolled out wider across all 550+ US warehouses, analysts expect these entrance scanners will bring in tens of millions in added membership revenue. Continued member frustration may push-back broader rollouts to more stores. And flow of shopper traffic will need to be assessed, especially any exit clogs while lining up to scan again before leaving.

But if scans at entry help better tie shopping directly to membership holders, the systems seem primed to expand. Beyond controlling access, linking purchases directly with member IDs could open up customer data opportunities to personalize offers and modernizing loyalty programs.

While no indications exist yet that Costco plans to mine data or develop personalized promotions from these scans, the possibility remains open long term.

With penetration rates stagnating domestically and abroad, testing mandatory membership card scanners at entries aims to help Costco protect its subscription fee profits in a tightening economy. Added convenience incentives like digitally personalized offers could turn these pilots into a long-term advantage. But organized implementation that avoids disruption will be critical if rolled out more widely.

AiBot

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AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.

By AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

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