Costco’s ‘Netflix moment’: Analysts say card scanners are already paying for themselves

Costco’s introduction of membership card scanners is still being rolled out in US stores, but 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 modest double-digit growth in membership following the introduction of scanners and suggest that high conversion rates from previously non-paying customers could lead to a “Netflix moment” for the retailer.

The report, authored by Simeon Gutman, acknowledges that Costco and Netflix have two very different business models, but suggests that the warehouse club’s new membership verification tool could lead to the same growth in paying customers that the streaming giant saw after took tough measures. password exchange.

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Since password sharing was restricted last year, Netflix has seen a major surge in new accounts. In the first quarter of 2024 alone, the streaming company added 9.3 million subscribers—five times more than in the same quarter in 2023.

“Our base case assumes Costco could add 4 million more members by attracting commission-free customers in North America,” Morgan Stanley analysts wrote.

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During Costco’s fourth-quarter earnings call last month. CEO Ron Vakris noted that the company has been using card readers in front of its stores in Europe for more than two years and has been testing the system in the United States for about six months.

He pointed out several ways the scanners help Costco improve efficiency in stores.

“This gives our operators real-time traffic data throughout the day. This way, we can adjust the outside lines needed to open and close lines based on business fluctuations,” Vakhris explained.

“We can keep track of our fresh products a little better because we know what the traffic data etc. looks like,” he said, “and it has also taken the hassle of checking membership from external registers and brought it to the front door , where we can look at people’s membership status.”

COSTCO’S FIRST MEMBERSHIP FEE INCREASE IN EFFECTIVENESS IN 7 YEARS

The Costco chief added that the scanners also allow shoppers to be notified when they need to renew their membership before they reach the store entrance. membership card scanners installed at the entrance doors are designed to speed up the ordering process. This has been very well received by our members.”

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