Is the era of free exploitation finally coming to an end?
That's what some are asking in light of the news that Costco COST,
Implement policies that will make it difficult for non-members to shop using someone else's membership card. This comes after efforts made by streaming platforms such as Netflix NFLX,
To clamp down on password sharing, not to mention create a strict paywall on various news and content sites.
In fact, this is a sea change in the consumer world, finance and marketing experts say. What was once free – even if through less entirely legitimate methods – now carries a price.
While consumers may object to these changes, many are ultimately willing to accept them—and eventually go too far.
“Independent scalpers understand that,” said Mark Boedman, head of global media at Solomon Partners, a financial advisory firm.
This certainly mirrors what happened with Netflix. The streaming giant announced last May that it was prohibiting subscribers from sharing their accounts with those outside their families. Instead, it gave them the option of adding those users for $7.99 per month or asking them to create and pay for their own accounts.
The change immediately sparked some flack — “I'm not paying the extra eight bucks, I just don't do it,” one Netflix user told The Washington Post — but in the end, Netflix benefited from the move. The company picked up 10 million subscribers last year, bringing the total to 247 million.
It's too early to know how the situation with Costco will develop. The membership-based warehouse chain is testing a membership card scanning system at the entrances to select stores instead of just allowing shoppers to show the card to an employee standing guard. Those who choose to self-checkout are also now required to show proof of membership at the time of purchase.
The effort is being made for several reasons, Costco CEO Richard Galanti told MarketWatch. But the key is actually reducing the problem of people avoiding paying membership fees using another member's card — something that became especially problematic when Costco initially rolled out the self-checkout option without having to prove membership at the register.
“Membership represents $4.6 billion of Costco's revenue, or 72% of the company's profits.“
Costco's policy has always allowed members to give the card to someone else in their household, but it has not allowed members to freely give the card to anyone at any time. The retailer was mainly willing to relax its rules during the height of the COVID-19 pandemic, when many members asked friends or family to shop on their behalf, Galanti said. But Costco now wants to end the practice of people taking advantage of someone else's membership.
As Galanti points out, there aren't many people taking advantage of the system, but it's enough to cause concern. “Even small percentages are meaningful,” he said.
Experts point out that this sheds light on why the entire era of free exploitation has come to an end. Businesses need to increase their revenue – and membership and subscription fees are too important a source to ignore. In Costco's case, membership represents $4.6 billion in revenue, or 72% of the company's profits, according to a Motley Fool report.
As for streaming services, subscriber growth often occurred organically during the height of the COVID-19 pandemic because people were confined to their homes and looking for entertainment options, Boedman noted. He explained that this situation has changed now that we have moved beyond the lockdown era, so it should not be surprising if services see reducing account sharing as a new way to increase subscription numbers.
Giving people a free ride, at least for a while, can be a form of marketing in itself, albeit a somewhat subtle one, said Craig Agranoff, a marketing specialist in Florida. It's a way for a company to introduce people to a product, with the idea that they'll become so addicted to it that they'll pay if they're eventually asked.
“It's a dark, hidden marketing tactic,” Agranov said.
