UPDATE: Costco is making headlines as it intensifies its membership enforcement policies to protect its profitability, which is increasingly vital in the face of rising costs. As of December 12, 2025, at its San Diego location, the wholesale giant is cracking down on unauthorized membership card sharing, reminiscent of Netflix’s recent strategies to boost subscriber numbers.
Costco, the world’s third-largest retailer by sales, reported $270 billion in net sales last fiscal year. However, despite this staggering figure, a significant portion of its profits actually stems from membership fees rather than merchandise sales. The company generated over $5.3 billion from membership fees alone, serving 68.3 million households and 12.7 million businesses.
The wholesale club’s average merchandise markup was only around 11% last year, sharply contrasting with the 25% to 50% typical for similar retailers. After accounting for overhead costs, Costco retained approximately $5 billion from its sales, highlighting the critical role that membership fees play in its financial health. This has prompted a 92.2% renewal rate in the U.S. and 89.7% globally, ensuring a steady revenue stream.
Analysts have pointed to this development as a “Netflix moment,” wherein Costco seeks to convert more non-paying customers into paying members. The company has implemented new ID checks at self-checkout and is utilizing advanced scanners at store entrances to enforce its membership policy more strictly.
Why does this matter NOW? With rising operational costs, Costco’s latest enforcement measures are crucial for maintaining its profit margins and overall business sustainability. The company is not just aiming to prevent freeloading; it is also enhancing the value offered to its members. New perks, including early shopping hours and premium membership upgrades, are part of this strategy designed to entice customers into paying more for added benefits.
The heightened membership enforcement is expected to yield significant financial benefits, setting the stage for potential price hikes in membership fees while delivering greater value to loyal customers. As the market evolves, Costco’s approach mirrors that of streaming services in monetizing access rather than relying solely on product sales.
With the competitive landscape of warehouse clubs heating up, Costco’s strategic shifts are essential for its continued success. The company is committed to ensuring that all members receive their money’s worth, moving beyond just the iconic $1.50 hot dog to a richer shopping experience.
As Costco navigates these changes, industry watchers will be keen to see how these policies affect membership growth and overall profitability in the coming months. Stay tuned for more developments as this story unfolds.
