Costco may have found its ‘Netflix moment’ with this move to boost membership

Costco’s rollout of membership card scanners at the front of its US stores is still in its infancy, but the move is already paying off big for the wholesale club.

Morgan Stanley analysts wrote in a note this week that Costco’s warehouses are seeing similarly low double-digit increases in membership counts after implementing the scanners, and suggested that high conversion rates of non-paying customers in advance could lead to ” retailer’s Netflix moment. .

The report, led by Simeon Gutman, acknowledged that Costco and Netflix have two very different business models, but suggested that the warehouse club’s new tool for checking memberships could lead to the kind of growth in paying customers that the streaming giant has seen. broadcast after it hit. password sharing.

Since limiting password sharing last year, Netflix has seen a significant increase in new accounts.

In the first quarter of 2024 alone, the streaming company added 9.3 million registrations – a fivefold increase compared to the same quarter in 2023.

“Our baseline scenario suggests that Costco could capture an additional 4 million members through converting toll-free customers in North America,” Morgan Stanley analysts wrote.

During Costco’s fourth-quarter earnings call last month, CEO Ron Vachris noted that the company has been using card readers at the front of its stores in Europe for more than two years now and has been piloting the system in the U.S. for about six month.

He showed several ways the scanners help Costco improve operational efficiency in stores.

“It gives our operators real-time traffic counts throughout the day. So we’re able to adjust the front lines we need to open and close lines based on business fluctuations,” Vachris explained.

“We can monitor our fresh feeds a little bit better because we know what the traffic counts look like and so on,” he said, “and it’s also taken the friction out of the membership verification from the front registers and moved it that at the front door, where we’re able to look at people’s membership status.”

The Costco boss added that the scanners also allow customers to be notified if their membership renewal is due before they reach the front of the store, “and membership card scanners installed on the front doors have delivered in order to speed up the checkout process.

“This has been very well received by our members.”