Two Lessons on Paywalls From Costco’s Food Court
The big-box retailer is about to require membership for access to its food court—even though it likely will be impossible to enforce. Here's what you can learn from the move.
Think of it as a real-life version of a “leaky paywall.”
Recently, the membership-oriented retail chain Costco revealed that it would require a membership card to take advantage of the chain’s famed food court, which has notably low prices and high-quality food. But actually limiting access to members will be a challenge.
Like the chain itself, Costco’s food court has a cultish element to it. Fans sing the praises of its hot dogs and pizza. And given that the prices are so low, the place is frequented by people who might not otherwise have had the need for a warehouse-style big-box store in their lives.
But that’s about to change, thanks to the new membership requirement, which was first revealed by a Costco-focused Instagram account last week and confirmed by the financial site Clark.com.
So what makes this paywall leaky? Well, in comments to Fox Business, a customer support person for the chain noted that the policy was already in place but was hard to enforce because many of the food courts are outside.
Despite that challenge, the idea of controlling access to valuable benefits is sound. Here are two lessons associations can take from Costco’s move:
Make sure your incentives aren’t being abused. Part of the reason that the food court is so cheap is that it encourages people to come into the store and spend money. But that value can evaporate if people are simply partaking in the loss leader instead of the actual thing you’re trying to sell. You want loss leaders to represent the top of the funnel, not the bottom.
Don’t be too rigid, however. If nonmembers get past Costco’s new policy, it won’t put too much of a damper on the company’s bottom line, and it might look worse from a PR standpoint if stores actually begin to turn people away. Redesigning the stores to bring food courts inside will likely not be worth it financially. That’s why the policy probably won’t be that big a deal in the end—something officially enforced, but not aggressively. This paywall is likely to stay leaky, and the company seems OK with that.