Why is Costco cracking down on membership sharing?

Costco is enforcing its membership policy more strictly because membership fees are a significant source of profit, contributing over half of the company's total profits.

How does Costco's membership enforcement compare to Netflix?

Both Costco and Netflix are implementing stricter policies on sharing, aiming to convert non-paying users into paying subscribers to increase revenue.

What is Costco's profit model compared to other retailers?

Costco relies more heavily on membership fees for profit, unlike retailers like Walmart or Target, which have higher merchandise markups.

Home / Business and Economy / Costco's Membership Crackdown: A Netflix Moment?

Costco's Membership Crackdown: A Netflix Moment?

21 Dec

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Summary

Costco relies heavily on membership fees for profit, exceeding merchandise margins.
The company implemented new scanners and ID checks to enforce membership policies.
This crackdown mirrors Netflix's strategy to convert non-paying users to subscribers.

Costco's Membership Crackdown: A Netflix Moment?

Costco has recently intensified the enforcement of its membership policy, introducing new scanners at entrances and ID checks at self-checkout stations. This strategic shift comes as the company's profitability is heavily reliant on membership fees, which are nearly pure profit, rather than the modest markups on merchandise. While net sales approached $270 billion last fiscal year, the average gross margin was only around 11%, significantly lower than competitors.

Last year, Costco collected over $5.3 billion in membership fees from millions of households and businesses, with remarkably high renewal rates exceeding 89% globally. This substantial income stream accounts for over half of the company's total profits. Consequently, cracking down on unauthorized card sharing has become a vital strategy to bolster revenue and financial stability.