Costco runs a membership-based business, and the chain has been cracking down to ensure that everyone who enters its warehouses has paid to join.
In some markets the company has employed tech that requires members to scan their membership cards before they enter the store.
In addition, the chain has tightened its rules to prohibit nonmembers from eating at its popular food courts. Technically, nonmembers were never allowed to buy items at the food courts, but Costco (COST) did not require people to show their membership cards when buying there.
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That loophole gave nonmembers access to the chain's $1.50 hot-dog-and-soda deal as well as the rest of its food-court offerings. Now, in many locations, you either can't get into a Costco warehouse club without showing your membership card or you have to show it at the food court before you can buy there.
It's a system that makes sense because the chain's entire business model comes from selling memberships. Over half of Costco's profit comes from membership sales, so the company's biggest goal is keeping members happy.
There are, however, two ways you can buy items from the warehouse club if you are not a member.
Image source: Patrick T. FALLON / AFP) (Photo by PATRICK T. FALLON/AFP via Getty Images
Costco has a new deal with Uber
You may not be able to enter a Costco without a membership, but you can order from the chain via Uber or Instacart. The warehouse club has worked with Instacart for years and recently partnered with Uber (UBER) in some markets.
"Nothing says summertime like family barbecues, pool hangs with your besties, and long weekends at the beach," the delivery and ride-share company says on its website. "All the fun comes with plenty of prep and we’re here to help.
"Uber Eats is partnering with Costco to make it easier than ever to get everything you need – for summer gatherings and beyond – delivered straight to your door. Stock up on all of your Costco favorites with just a few quick taps, and celebrate together."
Related: Costco has a new online store for members only
Important: Costco sells to nonmembers through Uber and Instacart, but the prices are not the same as they are for members.
"Item prices are marked up higher than your local warehouse. Instacart uses this markup to pay for their delivery service. There’s also a minimum order requirement of $35," Instacart notes on its website.
Uber also charges more for nonmembers but offers discounts for Costco members. Even with a membership, prices from both delivery services may be higher than they are in the chain's warehouses.
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Costco continues to grow its membership
Costco charges $60 for a standard Gold Membership and $120 for an Executive Membership, the latter coming with 2% back on most purchases up to $1,000 a year. The chain has been steadily growing its membership and has a stunningly high retention rate.
"In terms of renewal rates, at second-quarter end, our U.S. and Canada renewal rate came in at 92.9%, which is up 0.1% from Q1 and 12 weeks earlier, and the worldwide rate came in at 90.5% similar to the last quarter," now-retired Costco Chief Financial Officer Richard Galanti said during the company's second-quarter earnings call.
"Membership growth continues. We ended the second quarter with 73.4 million paid household members, up 7.8% versus last year, and 132 million cardholders, up 7.3%, with continuing growth throughout the quarters."
The warehouse club has also continued to grow its more lucrative Executive membership base.
"At Q2 end, we had 33.9 million paid Executive members, an increase of 646,000 during the 12-week second quarter. Executive members represent a little over 46% of paid members and a little over 73% of worldwide sales," he added,
