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Costco Tests Pre-Entry Membership Verification as Consumers Seek More Deals

With more consumers looking to find bargains on groceries, Costco is trying a new, more prohibitive membership verification process.

The warehouse club giant is testing out a system whereby consumers must scan their membership card upon entry to the store at a handful of locations, including at the store nearest to the chain’s headquarters, Fox Business reported.

The news comes as part of the chain’s broader crackdown on membership sharing. Over the summer, a Costco spokesperson confirmed to PYMNTS that the company would check members’ identities in the self-service area, asking to see the photos on people’s membership cards at self-checkout registers or, in the case of membership cards that do not include photos, to see photo identification.

These changes are being implemented as the chain has seen high demand amid ongoing economic challenges, with consumers seeking out deals. In its most recent earnings report, Costco shared that it had seen net sales up 6.1% year over year, 92.8% membership renewal rates in the U.S. and Canada and a 7.1% increase in cardholders.

Additionally, across membership and subscription industries, there is an increased focus on preventing sharing. For instance, Netflix saw subscriptions soar in the aftermath of its crackdown on password sharing.

For Costco, the motivation for consumers to find workarounds, if given the leeway, is especially high now, after years of inflationary pressures. PYMNTS Intelligence revealed that even as grocery price increases have slowed, consumers are feeling the impact of years of rising prices far more than they are feeling any alleviation.

Specifically, a survey of more than 2,100 U.S. consumers in September revealed that consumers estimated they were paying 23% more at the grocery store on average than they did just a year before, when prices had risen roughly that amount in the previous three years.

As such, consumers are looking for deals. The PYMNTS Intelligence report “Consumer Inflation Sentiment Report: Consumers Cut Back by Trading Down,” which was based on a study of more than 2,000 U.S. consumers, found that 47% have switched to merchants with lower prices for at least one grocery product. Plus, one-third of grocery shoppers have traded down from their favorite brands to less expensive alternatives such as store brands.

Across the membership club space, key players are stepping up their verification processes. For instance, the Walmart-owned Sam’s Club is replacing the practice of verifying receipts as shoppers exit with artificial intelligence-powered technology that can visually scan customers’ carts.

Costco remains one of the most popular retailers in the country. PYMNTS’ 2022 study “Decoding Consumer Affinity: The Customer Loyalty to Merchants Survey,” which drew from a survey of more than 2,000 U.S. consumers, found that 2.8% had shopped for groceries at Costco in the previous month, making it the sixth-most popular grocer and the single most popular warehouse club chain for grocery purchases.

As consumers continue to seek out bargains to navigate economic challenges, membership clubs like Costco are adapting to meet their needs while safeguarding their exclusive offerings.