by costco (COST) – Get a free report it has a very simple business model. Sells memberships in exchange for offering members a low-cost, no-nonsense shopping experience.
People pay to access chain warehouses. Those membership fees provide a significant portion of the chain’s profits, allowing Costco to sell its limited selection of merchandise at a lower margin than its competitors.
Membership, however, is the key piece to the puzzle. The warehouse club works hard to offer its members excellent value so that they continue their membership year after year. This is something Costco has been very good at.
“In terms of renewal rates, at the end of the first quarter, our renewal rates in the United States and Canada were 92.5% versus 92.4% a quarter ago,” CFO Richard Galanti said during The warehouse club’s first-quarter earnings call. “And the worldwide rate came in both at the end of the quarter and at the end of the previous quarter, at the same level at 90.4%.”
These are staggering numbers for a company that relies on memberships. It’s a unique business model compared to most retailers, and it’s based on one clear rule.
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You cannot shop at Costco without a membership
Costco’s business is the sale of subscriptions. This means that the company doesn’t allow non-members to shop at its stores. You can walk into a Costco without a membership card, but you shouldn’t be able to check out if you don’t have one.
This is something that the company has made great efforts to be protective of.
A video was recently posted on TikTok of a woman attempting to check out at Costco using her mother’s card. Technically, this isn’t allowed since 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 passes.
“The video includes an on-screen caption, ‘When you use your mom’s Costco card and it declines for ‘fraudulent activity.'” “Please wait, help is on the way” and someone, presumably the creator, gave a thumbs up which is definitely sarcastic,” shared The Daily Dot.
A number of commenters on the video shared similar experiences where Costco arrested people for attempting to use Costco membership cards that weren’t in their name.
Costco may terminate your membership
Costco reserves the right to terminate your membership if you attempt to lend your card to someone else. The company explains its policies on its website.
“You will be required to show your membership card when entering any Costco warehouse and when checking out at a payment register. Barcodes, photos or other copies are not acceptable,” the company shared, noting that ” memberships are non-transferable.
Members can bring guests into Costco’s warehouses, but these rules are very restrictive.
“Members are welcome to bring children and up to two guests into the warehouse; members are responsible for their own children and guests. Children are not to be left unattended. Only Costco members may purchase items,” the company posted.
Basically, Costco wants to protect its membership model. There’s nothing to stop members from making purchases on behalf of guests who are with them, but a guest cannot check out on their own without a card that has their or her name on them.
Detaining someone using their mother’s card may seem a little harsh, but it’s really just Costco operating the business model that allows them to offer members low rates.
Simply put, Costco won’t let you lend out your membership card, and doing so could put you and the person illegally using your card in danger. For the member, this could mean membership being revoked while the person “borrowing” the card runs the risk of being held back.
