First Netflix, now Costco

Costco will be starting to clamp down on membership sharing, as first reported by The Dallas Morning News and later confirmed by CNBC.

🪪 What’s changing: As of now, just the checkout process (don’t worry, $1.50 hot dogs are still safe).

Costco says it has always asked shoppers for their membership cards at checkout. But moving forward, it’ll also be requesting to see cards with a photo at self-checkout registers – and to view a photo ID if a shopper’s membership card has no picture.

According to the company, this policy change is driven by an increase in membership card sharing since it expanded self-checkout to more locations. And non-members sneaking into stores to access features only available for members is, much like Ron Burgundy, a big deal for the company given its business model.

• Costco's approach is to keep its prices barely above cost, then make up any potential lost revenue by selling memberships. Meaning most of its profit is derived from customer membership fees.
• For example, the retailer generated ~$4.2 billion in membership-fee revenue during its last fiscal year – a figure equal to more than 72% of its net income over the same period.

🛒 Big picture: There are ~69 million households with existing Costco memberships, which cost either $60/year or $120/year depending on the tier (though prices may not stay there for much longer…).