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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 to how its members shop has been a boon to profitability.
The wholesale retailer first rolled out a plan in early 2024 to crack down on customers sharing membership cards by scanning them right as shoppers enter.
Ron Vachris, who became CEO on January 1, told investors that the idea to scan members' cards at the door has made Costco stores even more efficient. It is now set to be rolled out more widely.
'We're testing some front door scanners,' he said during the third quarter earnings call in May. 'They're speeding up our registers significantly when we get all the scanning and memberships are verified at the front door.'
Faster service at the registers has a positive effect on an increasing grip for members. It frees up space in the normally jammed parking lots.
This new technology pulls up a photo of the cardholder on a screen, which the worker at the entrance can compare with the person standing in front of them.
With its new gambit to verify whether customers are indeed members, Costco appears to be taking a page out of Netflix's book
Pictured is the setup at the entrance of the Costco warehouse in Issaquah, Washington, that enables a store employee to view the photo associated with a membership card
Costco appears to be taking a page out of Netflix's book, which began bringing down the hammer on people sharing their account passwords with loved ones and friends in early 2023.
That decision earned Netflix an additional 9.3 million new customers, bringing its total subscriber base to almost 270 million.
It's not clear when these machines will be more broadly rolled out to Costco's more than 600 locations across the US, but a handful of stores in Washington state are already using them.
Users on Reddit commented on this new direction back when it was first being tested in the beginning of the year, and they were widely supportive.
One person pointed out that most gyms make their members scan IDs at the front before entering, 'so it’s funny that people are probably mad about Costco doing the same.'
Another wrote: 'I really don’t get the big deal. A machine that scans the membership card isn’t really any different that a person you flash the card to. It might be more efficient.'
Even though members won't be able to send their son or daughter on Costco runs with their card under this new system, Vachris said it will end up greatly improving the customer experience overall.
Partially automating the process of customer verification 'turns over parking spaces much quicker' and could allow for 'gas expansions where those are needed as well,' Vachris said.
Hundreds of people took to Reddit last year to complain about the parking lots at their local Costcos, with many describing them as 'a Mad Max situation' even at the best of times.
Others lamented that long lines for gas pumps - which are often right next to the entrance to the parking lot - makes maneuvering around even more difficult.
'Costco does a lot of things right, parking lots aren’t one of them,' one person wrote.
Pictured: A jam-packed parking lot at a Costco store in Richmond, California
Long lines for gas sometimes compound the issue 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 be 'expanded' over time. Currently, members can only do this with tech items and jewelry
During the May call, Costco CFO Gary Millerchip also hinted that the ability to buy products online and pick them up in store will be 'expanded.'
Currently, members can only do this with in stock tech products such as iPads and laptops and various forms of jewelry.
'We can't expand to all categories, but we're expanding as we currently speak in televisions and other electronic items,' Millerchip said. 'We see that as a real opportunity for us.'
Millerchip also hyped up a recently-struck deal with Uber that will now allow customers in 17 US states to order food from Costco through Uber Eats.
Despite raking in $58.52 billion in revenue for the third quarter, Costco announced in July it would increase the membership fee by September.
It is the first increase since June 2017, and will go up by $5 a year for the standard membership - taking it from $60 to $65 annually.