Costco’s introduction of membership card scanners on the front of US stores continues to be rolling out, however the move is already paying off big for the wholesale club.
Morgan Stanley analysts wrote in a note this week that Costco warehouses are seeing as much as low double-digit increases in membership counts after implementing the scanners, and suggested the high conversion rates of previously non-paying customers could lead on to the retailer’s “Netflix moment.”
The report, led by Simeon Gutman, acknowledged that Costco and Netflix have two very different business models, but suggested the warehouse club’s recent tool for checking memberships could lead on to the form of growth in paying customers that the streaming giant saw after it cracked down on password sharing.
Since limiting password-sharing last 12 months, Netflix has seen a big surge in recent accounts.
In the primary quarter of 2024 alone, the streaming company added 9.3 million sign-ups – a five-fold increase in comparison with the identical quarter in 2023.
“Our base scenario suggests Costco could capture an extra 4 million members through conversion of nonfee paying customers in North America,” the Morgan Stanley analysts wrote.
During Costco’s fourth quarter earnings call last month, CEO Ron Vachris noted that the corporate has used card readers on the front of its stores in Europe for greater than two years now and has been piloting the system within the US for roughly six months.
He pointed to several ways the scanners help Costco improve operational efficiency at stores.
“It gives our operators real-time traffic counts throughout the day. So, we’re capable of adjust front-end lines that we’d like to open and shut lines based on the fluctuations of business,” Vachris explained.
“We are able to monitor our fresh foods just a little higher because we all know what the traffic counts appear like and so forth,” he said, “and it has also taken the friction of membership verification away from the front-end registers and moved that to the front door, where we’re able to have a look at people’s membership status.”
The Costco chief added that the scanners also allow customers to be notified if their membership renewals are due before they reach the front end of the shop, “and the membership card scanners installed on the front doors have delivered on the goal of speeding up the checkout process.
“This has been thoroughly received by our members.”
