Costco CFO says that only a ‘really small percent’ of members misuse their cards, ‘but when you’re dealing with millions of transactions’ it adds up

• Costco is increasingly asking shoppers at self-checkout lanes to show a member ID with their photo.
• Its CFO told The WSJ that only a “really small percent” misuse their cards but this can quickly build up.
• Membership fees make up almost 2% of Costco’s total revenues.

Only a “really small percent” of Costco members share their cards with non-members, but because the company is so big the impact of this can quickly build up, CFO Richard Galanti told The Wall Street Journal.

The retailer is increasingly asking shoppers using its self-checkout lanes to show a member ID with their photo. “We don’t feel it’s right that non members receive the same benefits and pricing as our members,” the company previously told Insider.

The crackdown comes amid a rise in shoppers using cards that aren’t theirs to stock up on items at the membership-only warehouse chain, which has close to 600 stores across the US and Puerto Rico.

“It’s a really small percent of members who are doing it,” Galanti told The Journal. “But when you’re dealing with millions of transactions, even a very small percentage is something you would want to correct.”

Costco offers a Gold Star membership, priced at $60 a year, and an Executive membership, for $120, which both come with cards for two individuals at the same address. Costco says the membership format has a “significant effect” on its profitability and is designed to “reinforce member loyalty and provide continuing fee revenue.”

Membership fees made up almost 2% of Costco’s total revenues in the three months to May 7. The retailer brought in just over $1 billion in membership fees that quarter, a 6% year-over-year increase which it attributed to new member sign-ups, upgrades to Executive Membership, and a higher renewal rate. As of early May, Costco had 124.7 million total cardholders, with 69.1 million paid members, nearly half of which were Executive members.

Galanti told investors last month that Costco isn’t planning an imminent increase in membership fees. The retailer last raised its membership fees in 2017, when they went up by around 10%.

Did you previously borrow a friend or relative’s Costco card? Do you now plan to buy your membership? Email this reporter at [email protected].