• Costco’s membership crackdown could lead to an increase in revenue like Netflix.
• Analysts at Morgan Stanley say they have seen “surprising conversion rates” from buyers paying the fees.

The largest wholesale club retailer and the world’s largest streaming giant continues to have some similarities.

A year after Costco launched its Netflix-style membership crackdown, including increasing the number of ID scanners at main entrances, analysts say the company could see a similar surge in revenue.

“Costco’s continued membership rollout card scanners in its American clubs could soon deliver a Netflix moment,” Morgan Stanley’s retail team, led by analyst Simeon Gutman, said this week. The bank has an “overweight” rating on Netflix shares.

Business Insider was first to report ID scanner testing in a warehouse near the company’s headquarters in Issaquah, Washington, earlier this year.

Morgan Stanley said it had seen “surprising conversion rates” in some stores that implemented the new technology, with membership numbers increasing by up to double digits as previously non-member shoppers opted to pay the costs.

While Morgan Stanley estimates that Netflix’s subscriber count jumped 13% after the crackdown on password sharing, Gutman’s team said its base case is that Costco could increase its membership in the United States. United by 8%, or around 4 million new members.

In terms of revenue, even if just one of those five new signups was the more expensive executive membership, Costco would collect an additional $324 million in fees, analysts said.

The actual ratio of existing Gold Star and Executive members is closer to 50/50, which would increase dues revenue by nearly $400 million if new enrollments follow suit, they estimated.

While Costco is the third-largest retailer in the world by revenue – after Walmart and Amazon – the company makes most of its profits through member contributions.

Costco and other warehouse clubs don’t make much money on the products they sell, which are sold at such low margins as they are. almost at cost.

In other words, like Netflix, the key to profitability is charging members for exclusive access to its products and services.

Morgan Stanley analysts said: “Our analysis is theoretical and we are not changing our estimates. »

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