Costco's Crack Down on Membership Sharing Highlights The Big Issue of Identity Abuse

Costco is cracking down on people who use other people's membership cards to shop at its stores. The company now requires shoppers to show a photo ID at self-checkout registers, even if they use their own membership card. This is a response to an increase in membership sharing, which Costco says significantly impacts its profitability and membership growth.

Membership sharing is not a new problem, but it has become more common in recent years as more people have access to self-checkout registers. Furthermore, with a tougher economic outlook, retailers are focused on preventing card sharing to maintain and grow revenue by minimizing individuals taking advantage of benefits given to members. Costco is one of many companies that are cracking down on membership sharing. Other companies, such as Sam's Club, Netflix, and BJ's Wholesale Club, have also taken steps to prevent it.

The issue of membership sharing highlights a big and hard-to-enforce problem for e-commerce because individuals cyclically use multiple identities to take advantage of discounts and benefits. This is a growing problem as more and more businesses offer online discounts and rewards programs.

There are several ways that people can use multiple digital identities to take advantage of first-time discounts, return policies, loyalty programs, and much more. For example, individuals create or use multiple email addresses to redeem a 10% discount for first-time buyers that sign-up for their newsletter. Seemingly harmless, abusing these policies significantly impacts businesses, like Foot Locker reported that promotions and abuse lead to a 4% year year-over-year drop in their gross margins in their latest earnings.

  • Direct Financial Impact: exploited promotions and membership benefits lead to revenue losses and increased operational expenses for monitoring identification (i.e., store clerk checking Costco memberships).
  • Negative User Experience: enhanced security measures, like CAPTCHA or hardcoded rules, will inconvenience legitimate customers due to preventive protocols.
  • Skewing Your Data for Decision Making: by not being able to discern and segment abusers from legitimate customers, you will be using skewed data that will impact your forecasting of inventory, the success of marketing campaigns, and all data-driven decisions.

Mapping multiple identities into a single individual is challenging for brands because it requires a lot of resources and effort. Implementing a rule-based identity solution, such as blocking X account or address, is not effective because it creates a never-ending game of cat and mouse, where abusers will consistently outpace retailers.

Yofi understands the intricate balance between implementing customer-friendly policies and safeguarding them from exploitation, thus, enhancing the customer experience by avoiding tedious verifications and minimizing abuse. Yofi uses machine learning to create a comprehensive customer profile by analyzing over 600 features allowing us to flag and predict if someone is taking advantage of membership benefits. We have been able to help our partners save millions in discount abuse and reduce their return rates by 30%.