The latest sign Costco is having a 'Netflix moment'

• Costco's membership crackdown may bring in a Netflix-style revenue lift.
• Morgan Stanley analysts say they've seen "surprising conversion rates" of shoppers paying the fee.
• Costco could grow US signups by about 8%, or about 4 million people, analysts estimated.

The largest wholesale club retailer and the world's biggest streaming giant continue to have some similarities.

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

"Costco's ongoing roll-out of membership card scanners at its US clubs could soon deliver a Netflix moment," Morgan Stanley's retail team, led by analyst Simeon Gutman, said in a note this week. The bank has an "overweight" rating on Netflix's stock.

Business Insider was first to report on the testing of the ID scanners at a warehouse near the company's headquarters in Issaquah, Washington, earlier this year.

Morgan Stanley said they've observed "surprising conversion rates" at selected stores that implemented the new tech, with membership counts rising by as much as low double-digits due to previously non-member shoppers electing to pay the fee.

While Morgan Stanley estimates Netflix's subscribers jumped 13% after its password-sharing crackdown, Gutman's team said its base scenario is that Costco could grow its US membership by 8%, or about 4 million new members.

In terms of revenue, even if just one of five of those new signups were the higher-priced Executive membership, Costco would pull in an extra $324 million in fees, the analysts said.

The actual ratio of existing Gold Star and Executive members is closer to 50/50, which would boost fee revenue by closer to $400 million if the new signups followed suit, they estimated.

While Costco is the third-largest retailer in the world in terms of revenue — following Walmart and Amazon — the company makes most of its profit from membership fees.

Costco and other warehouse clubs don't make much money from the products they sell, which are sold at such low markups that they are nearly at cost.

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

The Morgan Stanley analysts said, "Our analysis is theoretical and we are not changing our estimates."

If you are a Costco worker who wants to share your perspective, please contact Dominick via email or text/call/Signal at 646.768.4750. Responses will be kept confidential, and Business Insider strongly recommends using a personal email and a non-work device when reaching out.