Memberships Cards Have Been Very Profitable To Stores Like Costco And Starbucks. Should You Also Offer Membership Cards?

There are now plenty of articles and videos online stating that stores such as Costco, Walmart and especially Starbucks are not stores anymore that sell you physical products but have actually turned into profitable banks because of their membership card business.

Starbucks alone has raked in US$ 2.1 billion in unused rewards memberships cards and US$ 1 billion in gift cards in 2022. Combined together this is a staggering US$ 3.1 billion which is just sitting around in the company’s financial accounts.

And don’t forget the less sexier but more profitable Costco who made US$ 3.9 billion from its membership cards in 2021. As you can see, a membership card when used correctly is worth a lot of money to a company, even up to several billions.

It is a physical or digital card that is primarily used to prove the membership of a person to a certain organization. These organizations can be anything: social, sports, business and so on. It can be used to admit an organization’s member during the organization’s events. It can also be used by the organization to attract more financial transactions from the member by offering the member preferential benefits that the organization wouldn’t normally give to non-members.

Membership cards for example are in widespread use in the retail industry where retailers offer future price discounts if a customer buys a membership card. But not all membership cards are bought, some are free.

There are retailers who use membership cards as some sort of promotional materials to increase the frequency of return business. Other retailers simply collect customer contact details in exchange for membership cards as a way to create potential customer lists.

Starbucks is a global coffee shop business. They have 33,833 stores all over the world. They have more stores outside the USA than they have overseas. This makes Starbucks a truly global brand.

At the peak of its success during the nineties and early 2000s, 7 Starbucks stores opened each day. But then their business model floundered soon after. They closed 600 stores in 2008 and another 300 more in 2009.

Then the company became more technology focused and implemented a digital membership rewards card strategy. Soon, Starbuck’s digital membership rewards card became the number one membership card among US food shops.

It even beat out more established rivals such as Dominos, Pizza Hut, Dunkin Donuts and so on. It even beat out the king of all fast food shops which is McDonalds. It soon generated over US$ 1 billion in its membership cards strategy alone.

To put how successful this is in a perspective, over 85% of banks in the US have less than a billion US dollars in assets. This basically means that Starbucks has more capital than most US banks and other banks in the world in general.

According to the Motley Fool, a famous finance media company in the US, Costco’s annual membership fee generated US$ 3.9 billion in profits in 2021 which represents 80% of its profits last year.

But this is no big secret among people who study and analyze the retailing industry. According to Yahoo Finance, Costco generates at least US$ 60 million in revenue from its membership fees alone for every 1 million members worldwide.

In case you’re wondering who or what is Costco, here is a brief summary: Costco or Costco Wholesale Corporation or simply Costco Wholesale is an American multinational corporation which operates a membership-only warehouse club.

As of 2020, it has become the third largest retailer in the world and the word’s largest retailer of choice and prime beef, organic foods, rotisserie chicken and wine as of 2016 (Partial Source: Wikipedia).

As of 2021, Costco ranks 10th on the Fortune 500 rankings of the US corporations in total revenue. This highlights just how profitable membership cards can be even if you’re just selling essentially basic items.

So far, what has been essentially discussed is how profitable membership cards can be to a company. But do membership cards have any real benefits to the customers or is it the company who just basically benefits?

Let’s take for example membership discounts. When a company gives discounts to a customer the company loses and the customer wins right? Well, technically this is true. But you have to consider that if done correctly, a company can offer discounts yet also make good profits.

How about the customer? Did they really win or were the discounts given to them by the company already factored in the actual price of the product? Let’s not forget that thru the discount the company offered the customer brought the company repeat business.

Hence, much more profit from the company as against the discount they offered. How about the membership fees? As Starbucks have demonstrated, it takes a long time for a member to actually use their rewards card if they ever use it at all.

Simply put, a membership card is very useful to a customer if they regularly have time to actually use their membership card. The accumulation of the discounts for example that they can get could be worth the price of the membership card.

Since we’re mostly conducting our social lives and businesses online now, I would advise that you use a digital membership card strategy. You don’t actually have to build a digital membership card software from the ground up.

All that you need to do is for example, Google the search keywords: “digital membership card solutions provider” and Google would turn up a list of articles from companies that provide digital membership card software solutions.

Or you can do it the old way by issuing physical paper or plastic membership cards. This old-time strategy would work for small to medium businesses but could be very time consuming for large companies.

You can also hire an app developer to create a customized digital membership card that could not only process discounts and other member benefits and promotions but could also integrate such functions as social media and gaming. This is favorable for young members.

It also doesn’t matter if your business sells a physical product, a service or anything. There would always be customers who are after discounts and those who want premium benefits from companies. So membership cards apply to any business.

As Starbucks and Costco have shown, a membership card strategy can be very profitable for a business. Each of these companies are making billions each year from membership cards that they have been likened to banks already.

Membership cards are designed by companies to increase their revenues thru repeat business and via the membership card fees themselves. Even if you’re just a small business, you can implement a successful membership card strategy.

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