Costco (COST) – Get a free report has a very simple business model. It sells memberships in exchange for providing members with a low-cost, no-frills shopping experience.
People pay to access the chain’s warehouses. Those membership fees make up a significant portion of the chain’s profits, allowing Costco to sell its limited selection of goods at a lower price than its rivals.
Membership, however, is the most important piece of the puzzle. The warehouse club works hard to provide its members with excellent value, ensuring that they remain members year after year. That’s something Costco has been very effective at.
“In terms of renewal rates, our renewal rates in the US and Canada were 92.5% at the end of the first quarter, compared to 92.4% a quarter ago,” CFO Richard Galanti said on the warehouse club’s first quarter earnings call. quarter. “And the global percentage came in both at the end of this quarter and at the end of last quarter, the same level of 90.4%.”
Those are staggering numbers for a company that relies on memberships. It’s a unique business model compared to most retailers and one that is based on one clear rule.
You can’t shop at Costco without a membership
Costco’s company sells memberships. That means the company doesn’t allow non-members to shop in its stores. You can enter a Costco without a membership card, but you’re not supposed to be able to check out if you don’t have one.
That’s something the company has put a lot of effort into.
A video was recently posted to TikTok of a woman trying to check out of Costco using her mother’s card. Technically, that’s not allowed, as people living in the same household must each have their own card, and family members who don’t share an address must get their own membership.
“The video features an on-screen caption: ‘When you use your mom’s Costco card and it declines due to ‘fraudulent activity.’ thumbs up, which is certainly sarcastic,” said The Daily Dot.
A number of commenters on the video shared similar experiences where Costco detained people for trying to use Costco membership cards that were not in their name.
Costco may revoke your membership
Costco reserves the right to revoke your membership if you attempt to lend your card to someone else. The company describes its policies on its website.
“You must present your membership card when entering a Costco warehouse and when checking out at a register. Bar codes, photos, or other copies are not acceptable,” the company said, noting that “memberships are not transferable.
Members are allowed to bring guests into Costco’s warehouses, but those rules are very restrictive.
“Members are welcome to bring children and up to two guests to the warehouse; members are responsible for their children and guests. Children must not be left unattended. Only Costco members may purchase items,” the company wrote.
In short, Costco wants to protect its membership model. There is nothing stopping members from making purchases on behalf of guests who are with them, but a guest cannot check out independently without a membership card in their name.
Holding someone with their mom’s card might seem a bit harsh, but that’s really just Costco maintaining the business model that allows it to offer members low prices.
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 at risk. For the member, that could mean having your membership revoked, while the person “borrowing” the card risks being detained.