Costco COST has a very simple business model. Sell memberships in exchange for offering members a low-cost and easy shopping experience.
People pay to access the chain’s stores. Those membership fees provide a significant portion of the chain’s profits, allowing Costco to sell its limited selection of products at a lower profit margin than its rivals.
Membership, however, is the key piece of the puzzle. The Warehouse Club works hard to offer its members an excellent value so that they continue to be members year after year. That’s something Costco has been very effective at.
“In terms of renewal rates, at the end of the first quarter, our renewal rates in the US and Canada were 92.5% compared to 92.4% a quarter ago,” said CFO, Richard Galanti, during the warehouse club meeting. first quarter earnings call. “And the global rate was at both the end of this quarter and the end of the previous quarter, the same level at 90.4%.”
Those are staggering numbers for a company that relies on memberships. It is a unique business model compared to most retailers and is based on a clear rule.
You can’t shop at Costco without a membership.
Costco’s business is selling memberships. That means the company does not allow non-members to shop at its stores. You can walk into Costco without a membership card, but you’re not supposed to pay if you don’t have one.
That’s something the company has been going to great lengths to protect,
A video was recently posted on TikTok of a woman trying to pay at Costco using her mother’s card. Technically, that’s not allowed since people living in the same household must have their own card and family members who don’t share an address must get their own memberships.
“The video includes an on-screen caption, ‘When you use your mom’s Costco card and it gets declined for ‘fraudulent activity.'” The video shows a cart full of Costco items, a self-checkout station with a digital sign ‘Please wait, help is on the way,’ and someone, presumably the creator, gives a thumbs up that is admittedly sarcastic.” the daily point shared.
Several commenters on the video shared similar experiences where Costco stopped people for trying to use Costco membership cards that were not in their name.
Costco can revoke your membership
Costco reserves the right to revoke your membership if you attempt to loan your card to someone else. The company details its policies on its website.
“You will be asked to show your membership card upon entering any Costco warehouse and when paying at a checkout register. Barcodes, photos, or other copies are not accepted,” the company shared, noting that “memberships are not are transferable.”
Members can bring guests into Costco stores, but those rules are very restrictive.
“Members may bring children and up to two guests to the warehouse; members are responsible for their children and guests. Children should not be left unattended. Only Costco members may purchase items,” the company posted.
Basically, Costco wants to protect its membership model. There is nothing to prevent members from making purchases on behalf of the guests who are with them, but a guest cannot pay on their own without a membership card bearing their name on it.
Stopping someone using your mom’s card might seem a bit harsh, but that’s just Costco enforcing the business model that allows it to offer low prices to members.
Simply put, Costco does not allow you to lend your membership card, and doing so could put you and the person using your card illegally in danger. For the member, that could mean their membership is revoked while the person “borrowing” the card risks being arrested.
