Costco Fights Membership Sharing in Bid to Add Revenue

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24/7 Wall St. Insights

• Costco Wholesale Corp. ( NASDAQ: COST ) has announced a new policy about sharing membership cards.
• The popular retailer thinks it has found a way to make more money beyond selling products and services.
• Also: Dividend legends to hold forever .

People who share memberships without paying for them can cost membership-based companies a lot of money. Netflix Inc. ( NASDAQ: NFLX ) recently addressed the problem of people sharing passwords and added substantial revenue.

Netflix started to eliminate the use of passwords by more than one household in the United States in May 2023. While the company did not give specific results of the decision, it added over 9 million subscribers two quarters after the decision. Netflix management called the new rules a success.

Costco Wholesale Corp. ( NASDAQ: COST ) has taken Netflix's lead with a new policy about sharing membership cards. The retailer released its new policy : “Over the coming months, membership scanning devices will be used at the entrance door of your local warehouse. Once deployed, prior to entering, all members must scan their physical or digital membership card by placing the barcode or QR Code against the scanner.” People who are not members or using inactive accounts will need to get an account or be turned away.

The decision will not substantially change Costco’s total revenue because membership fees are about 2% of its top line. However, it is part of a broader effort to increase that number. Costco made another membership policy decision recently. It raised membership fees for the first time since 2017. Individual annual fees went up by $5 to $65, and executive membership fees rose $10 to $130.

Costco’s new membership plans may not radically increase its total revenue. However, they show that Costco thinks it has found a way to make more money beyond selling products and services.

How to Get the Biggest Bang for Your Costco Membership Buck

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